{ "ticker": "MS", "company": "Morgan Stanley", "filing_type": "10-K", "year_current": "2024", "year_prior": "2023", "summary": { "added": 34, "removed": 33, "modified": 125, "unchanged": 42, "total_current": 201, "total_prior": 200 }, "source": "SEC EDGAR", "url": "https://riskdiff.com/ms/2024-vs-2023/", "markdown_url": "https://riskdiff.com/ms/2024-vs-2023/index.md", "json_url": "https://riskdiff.com/ms/2024-vs-2023/index.json", "generated": "2026-06-01", "ai_summary": null, "risks": [ { "status": "ADDED", "current_title": "Operational Risk", "prior_title": null, "current_body": "Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors (e.g., inappropriate or unlawful conduct) or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal, regulatory and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology (\"IT\") and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”" }, { "status": "ADDED", "current_title": "Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.", "prior_title": null, "current_body": "Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding. In addition, our ability to raise funding could be impaired if investors, depositors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading, credit or operational losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity. If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition." }, { "status": "ADDED", "current_title": "Risk management and strategy", "prior_title": null, "current_body": "We, our businesses, and the broader financial services industry face an increasingly complex and evolving threat environment. We have made and continue to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead our Cybersecurity and Information Security organizations and program under the oversight of our Board of Directors (“Board”) and the Operations and Technology Committee of the Board (“BOTC”). See “Risk Factors—Operational Risk” for information on risks to the Firm from cybersecurity threats. As part of our enterprise risk management (“ERM”) framework, we have implemented and maintain a program to assess, identify and manage risks arising from the cybersecurity threats confronting the Firm (“Cybersecurity Program”). Our Cybersecurity Program helps protect our clients, customers, employees, property, products, services and reputation by seeking to preserve the confidentiality, integrity and availability of information, enable the secure delivery of financial services, and protect the business and the safe operation of our technology systems. We continually adjust our Cybersecurity Program to address the evolving cybersecurity threat landscape and comply with extensive legal and regulatory expectations." }, { "status": "ADDED", "current_title": "Processes for assessing, identifying and managing material risks from cybersecurity threats", "prior_title": null, "current_body": "Our Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to our network, infrastructure, computing environment and the third parties that we rely on. We periodically assess the design of our cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework for Improving Critical Infrastructure Cybersecurity, as well as global cybersecurity regulations, and develop improvements to those controls in response to that assessment. Our Cybersecurity Program also includes cybersecurity and information security policies, procedures and technologies that are designed to address regulatory requirements and protect our clients’, employees’ and own data against unauthorized disclosure, modification and misuse. These policies, procedures and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning. Our threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs our cybersecurity risk assessments and strategy. This information is also provided to an internal forensics team, which develops and implements technologies designed to help detect these cybersecurity threats across our environment. Where a potential threat is identified in our environment, our incident response team evaluates the potential impact to the Firm and coordinates remediation where required. These groups, as well as the Operational Risk Department, review external cybersecurity incidents that may be relevant to the Firm, and the outcomes of these incidents further inform the design of our Cybersecurity Program. In addition, we maintain a robust global training program on cybersecurity risks and requirements and conduct regular phishing email simulations for our employees and consultants.Our processes are designed to help oversee, identify and mitigate cybersecurity risks associated with our use of third-party vendors. We maintain a third-party risk management program that includes evaluation of, and response to, cybersecurity risks at our third-party vendors. Prior to engaging third-party vendors to provide services to the Firm, we conduct assessments of the third-party vendors’ cybersecurity programs to identify the impact of their services on the cybersecurity risks to the Firm. Once on-boarded, third-party vendors’ cybersecurity programs are subject to risk-based oversight, which may include security questionnaires, submission of independent security audit reports or a Firm audit of the third-party vendor’s security program, and, with limited exceptions, third-party vendors are required to meet our cybersecurity standards. Where a third-party vendor cannot meet those standards, its services, and the residual risk to the Firm, are subject to review, challenge and escalation through our risk management processes and ERM committees, which may ultimately result in requesting increased security measures or ceasing engagement with such third-party vendor. Our Cybersecurity Program is regularly assessed by the Internal Audit Department (“IAD”) through various assurance activities, with the results reported to the Audit Committee of the Board (“BAC”) and the BOTC. Annually, certain elements of the Cybersecurity Program are subject to an audit by an independent consultant, as well as an assessment by a separate, independent third party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. Our Cybersecurity Program is also examined regularly by the Firm’s prudential and conduct regulators within the scope of their jurisdiction.GovernanceManagement’s role in assessing and managing material risks from cybersecurity threatsOur Cybersecurity Program is operated and maintained by management, including the Chief Information Officer of Cyber, Data, Risk and Resilience (“CIO”) and the Chief Information Security Officer (“CISO”). These senior officers strategy. This information is also provided to an internal forensics team, which develops and implements technologies designed to help detect these cybersecurity threats across our environment. Where a potential threat is identified in our environment, our incident response team evaluates the potential impact to the Firm and coordinates remediation where required. These groups, as well as the Operational Risk Department, review external cybersecurity incidents that may be relevant to the Firm, and the outcomes of these incidents further inform the design of our Cybersecurity Program. In addition, we maintain a robust global training program on cybersecurity risks and requirements and conduct regular phishing email simulations for our employees and consultants. Our processes are designed to help oversee, identify and mitigate cybersecurity risks associated with our use of third-party vendors. We maintain a third-party risk management program that includes evaluation of, and response to, cybersecurity risks at our third-party vendors. Prior to engaging third-party vendors to provide services to the Firm, we conduct assessments of the third-party vendors’ cybersecurity programs to identify the impact of their services on the cybersecurity risks to the Firm. Once on-boarded, third-party vendors’ cybersecurity programs are subject to risk-based oversight, which may include security questionnaires, submission of independent security audit reports or a Firm audit of the third-party vendor’s security program, and, with limited exceptions, third-party vendors are required to meet our cybersecurity standards. Where a third-party vendor cannot meet those standards, its services, and the residual risk to the Firm, are subject to review, challenge and escalation through our risk management processes and ERM committees, which may ultimately result in requesting increased security measures or ceasing engagement with such third-party vendor. Our Cybersecurity Program is regularly assessed by the Internal Audit Department (“IAD”) through various assurance activities, with the results reported to the Audit Committee of the Board (“BAC”) and the BOTC. Annually, certain elements of the Cybersecurity Program are subject to an audit by an independent consultant, as well as an assessment by a separate, independent third party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. Our Cybersecurity Program is also examined regularly by the Firm’s prudential and conduct regulators within the scope of their jurisdiction. Governance" }, { "status": "ADDED", "current_title": "Management’s role in assessing and managing material risks from cybersecurity threats", "prior_title": null, "current_body": "Our Cybersecurity Program is operated and maintained by management, including the Chief Information Officer of Cyber, Data, Risk and Resilience (“CIO”) and the Chief Information Security Officer (“CISO”). These senior officers December 2023 Form 10-K26 December 2023 Form 10-K26 December 2023 Form 10-K26 26 Table of Contents Table of Contents Table of Contents are responsible for assessing and managing the Firm’s cybersecurity risks. Our Cybersecurity Program strategy, which is set by the CISO and overseen by the Head of Operational Risk, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. Our Cybersecurity Program also includes processes for escalating and considering the materiality of incidents that impact the Firm, including escalation to senior management and the Board, which are periodically tested through tabletop exercises.The members of management that lead our Cybersecurity Program and strategy have extensive experience in technology, cybersecurity and information security. The CIO has over 30 years of experience in various engineering, IT, operations and information security roles. The CISO has over 25 years of experience leading cybersecurity teams at financial institutions, including in the areas of IT strategy, risk management and information security. The Head of Operational Risk has over 20 years of experience in technology, security and compliance roles, including experience in government security agencies.Risk levels and mitigating measures are presented to and monitored by dedicated management-level cybersecurity risk committees. These committees include representatives from Firm management as well as business and control stakeholders who review, challenge and, where appropriate, consider exceptions to our policies and procedures. Significant cybersecurity risks are escalated from these committees to our Non-Financial Risk Committee. The CIO and the Head of Operational Risk report on the status of our Cybersecurity Program, including significant cybersecurity risks; review metrics related to the program; and discuss the status of regulatory and remedial actions and incidents to the Firm Risk Committee, the BOTC and the Board, as appropriate. For more information regarding the Firm’s ERM framework, see “Quantitative and Qualitative Disclosures about Risk—Risk Management.”Board of Directors’ oversight of risks from cybersecurity threatsAs discussed above, material cybersecurity risks are addressed by management-level ERM committees with escalation to the BOTC and Board, as appropriate. The BOTC has primary responsibility for assisting the Board in its oversight of significant operational risk exposures of the Firm and its business units, including IT, information security, fraud, third-party oversight, business disruption and resilience, and cybersecurity risks (including review of cybersecurity risks against established risk management methodologies) and the steps management has taken to monitor and control such exposures. In accordance with its charter, the BOTC receives quarterly reports from (i) the Technology Department (“Technology”), including the CIO or the CISO; (ii) the Operations Department (“Operations”); and (iii) the Non-Financial Risk Management Department (“NFR”). Such reporting includes updates on our Cybersecurity Program, risks from cybersecurity threats, our programs to address and mitigate the risks associated with the evolving cybersecurity threat environment, and the Operational Risk Department’s assessment of cybersecurity risks. Senior officers in Technology and NFR also provide an annual report to the BOTC on the status of our Cybersecurity Program, including a discussion of risks arising from cybersecurity threats, in compliance with the Gramm-Leach-Bliley Act. At least annually, these senior management representatives discuss the status of the Cybersecurity Program and key cybersecurity risks with the Board. The BOTC also receives an annual independent assessment of key aspects of our Cybersecurity Program from an external party and holds joint meetings with the BAC and Risk Committee of the Board (“BRC”), as necessary and appropriate. In addition, members of the BOTC periodically participate in incident response tabletop exercises and the BOTC periodically receives reports from incident response tabletop exercises performed by and for management.At least annually, the BOTC or the Board reviews and approves the Global Cybersecurity Program Policy, the Global Information Security Program Policy, the Global Third-Party Risk Management Policy, and the Global Technology Policy. The chair of the BOTC regularly reports to the Board on risks from cybersecurity threats and other matters reviewed by the BOTC. In accordance with the Board’s Corporate Governance Policies, all Board members are invited to attend BOTC meetings and have access to meeting materials. Senior management, including the senior officers mentioned above, discuss cybersecurity developments with the chair of the BOTC between Board and committee meetings, as necessary. The BOTC meets regularly in executive session with management, including the Head of NFR, and senior officers from Technology and Operations. are responsible for assessing and managing the Firm’s cybersecurity risks. Our Cybersecurity Program strategy, which is set by the CISO and overseen by the Head of Operational Risk, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. Our Cybersecurity Program also includes processes for escalating and considering the materiality of incidents that impact the Firm, including escalation to senior management and the Board, which are periodically tested through tabletop exercises.The members of management that lead our Cybersecurity Program and strategy have extensive experience in technology, cybersecurity and information security. The CIO has over 30 years of experience in various engineering, IT, operations and information security roles. The CISO has over 25 years of experience leading cybersecurity teams at financial institutions, including in the areas of IT strategy, risk management and information security. The Head of Operational Risk has over 20 years of experience in technology, security and compliance roles, including experience in government security agencies.Risk levels and mitigating measures are presented to and monitored by dedicated management-level cybersecurity risk committees. These committees include representatives from Firm management as well as business and control stakeholders who review, challenge and, where appropriate, consider exceptions to our policies and procedures. Significant cybersecurity risks are escalated from these committees to our Non-Financial Risk Committee. The CIO and the Head of Operational Risk report on the status of our Cybersecurity Program, including significant cybersecurity risks; review metrics related to the program; and discuss the status of regulatory and remedial actions and incidents to the Firm Risk Committee, the BOTC and the Board, as appropriate. For more information regarding the Firm’s ERM framework, see “Quantitative and Qualitative Disclosures about Risk—Risk Management.”Board of Directors’ oversight of risks from cybersecurity threatsAs discussed above, material cybersecurity risks are addressed by management-level ERM committees with escalation to the BOTC and Board, as appropriate. The BOTC has primary responsibility for assisting the Board in its oversight of significant operational risk exposures of the Firm and its business units, including IT, information security, fraud, third-party oversight, business disruption and resilience, and cybersecurity risks (including review of cybersecurity risks against established risk management methodologies) and the steps management has taken to monitor and control such exposures. In accordance with its charter, the BOTC receives quarterly reports from (i) the Technology Department (“Technology”), including the CIO or the CISO; (ii) the Operations are responsible for assessing and managing the Firm’s cybersecurity risks. Our Cybersecurity Program strategy, which is set by the CISO and overseen by the Head of Operational Risk, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. Our Cybersecurity Program also includes processes for escalating and considering the materiality of incidents that impact the Firm, including escalation to senior management and the Board, which are periodically tested through tabletop exercises. The members of management that lead our Cybersecurity Program and strategy have extensive experience in technology, cybersecurity and information security. The CIO has over 30 years of experience in various engineering, IT, operations and information security roles. The CISO has over 25 years of experience leading cybersecurity teams at financial institutions, including in the areas of IT strategy, risk management and information security. The Head of Operational Risk has over 20 years of experience in technology, security and compliance roles, including experience in government security agencies. Risk levels and mitigating measures are presented to and monitored by dedicated management-level cybersecurity risk committees. These committees include representatives from Firm management as well as business and control stakeholders who review, challenge and, where appropriate, consider exceptions to our policies and procedures. Significant cybersecurity risks are escalated from these committees to our Non-Financial Risk Committee. The CIO and the Head of Operational Risk report on the status of our Cybersecurity Program, including significant cybersecurity risks; review metrics related to the program; and discuss the status of regulatory and remedial actions and incidents to the Firm Risk Committee, the BOTC and the Board, as appropriate. For more information regarding the Firm’s ERM framework, see “Quantitative and Qualitative Disclosures about Risk—Risk Management.”" }, { "status": "ADDED", "current_title": "Board of Directors’ oversight of risks from cybersecurity threats", "prior_title": null, "current_body": "As discussed above, material cybersecurity risks are addressed by management-level ERM committees with escalation to the BOTC and Board, as appropriate. The BOTC has primary responsibility for assisting the Board in its oversight of significant operational risk exposures of the Firm and its business units, including IT, information security, fraud, third-party oversight, business disruption and resilience, and cybersecurity risks (including review of cybersecurity risks against established risk management methodologies) and the steps management has taken to monitor and control such exposures. In accordance with its charter, the BOTC receives quarterly reports from (i) the Technology Department (“Technology”), including the CIO or the CISO; (ii) the Operations Department (“Operations”); and (iii) the Non-Financial Risk Management Department (“NFR”). Such reporting includes updates on our Cybersecurity Program, risks from cybersecurity threats, our programs to address and mitigate the risks associated with the evolving cybersecurity threat environment, and the Operational Risk Department’s assessment of cybersecurity risks. Senior officers in Technology and NFR also provide an annual report to the BOTC on the status of our Cybersecurity Program, including a discussion of risks arising from cybersecurity threats, in compliance with the Gramm-Leach-Bliley Act. At least annually, these senior management representatives discuss the status of the Cybersecurity Program and key cybersecurity risks with the Board. The BOTC also receives an annual independent assessment of key aspects of our Cybersecurity Program from an external party and holds joint meetings with the BAC and Risk Committee of the Board (“BRC”), as necessary and appropriate. In addition, members of the BOTC periodically participate in incident response tabletop exercises and the BOTC periodically receives reports from incident response tabletop exercises performed by and for management.At least annually, the BOTC or the Board reviews and approves the Global Cybersecurity Program Policy, the Global Information Security Program Policy, the Global Third-Party Risk Management Policy, and the Global Technology Policy. The chair of the BOTC regularly reports to the Board on risks from cybersecurity threats and other matters reviewed by the BOTC. In accordance with the Board’s Corporate Governance Policies, all Board members are invited to attend BOTC meetings and have access to meeting materials. Senior management, including the senior officers mentioned above, discuss cybersecurity developments with the chair of the BOTC between Board and committee meetings, as necessary. The BOTC meets regularly in executive session with management, including the Head of NFR, and senior officers from Technology and Operations. Department (“Operations”); and (iii) the Non-Financial Risk Management Department (“NFR”). Such reporting includes updates on our Cybersecurity Program, risks from cybersecurity threats, our programs to address and mitigate the risks associated with the evolving cybersecurity threat environment, and the Operational Risk Department’s assessment of cybersecurity risks. Senior officers in Technology and NFR also provide an annual report to the BOTC on the status of our Cybersecurity Program, including a discussion of risks arising from cybersecurity threats, in compliance with the Gramm-Leach-Bliley Act. At least annually, these senior management representatives discuss the status of the Cybersecurity Program and key cybersecurity risks with the Board. The BOTC also receives an annual independent assessment of key aspects of our Cybersecurity Program from an external party and holds joint meetings with the BAC and Risk Committee of the Board (“BRC”), as necessary and appropriate. In addition, members of the BOTC periodically participate in incident response tabletop exercises and the BOTC periodically receives reports from incident response tabletop exercises performed by and for management. At least annually, the BOTC or the Board reviews and approves the Global Cybersecurity Program Policy, the Global Information Security Program Policy, the Global Third-Party Risk Management Policy, and the Global Technology Policy. The chair of the BOTC regularly reports to the Board on risks from cybersecurity threats and other matters reviewed by the BOTC. In accordance with the Board’s Corporate Governance Policies, all Board members are invited to attend BOTC meetings and have access to meeting materials. Senior management, including the senior officers mentioned above, discuss cybersecurity developments with the chair of the BOTC between Board and committee meetings, as necessary. The BOTC meets regularly in executive session with management, including the Head of NFR, and senior officers from Technology and Operations. 27December 2023 Form 10-K 27December 2023 Form 10-K 27December 2023 Form 10-K 27 Table of Contents Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Net Revenues by Region1", "prior_title": null, "current_body": "($ in millions) 1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements. •Americas net revenues in 2023 increased 4%, primarily driven by results within the Wealth Management business segment and Other net revenues within the Institutional Securities business segment, partially offset by lower results across businesses within the Institutional Securities business segment. •EMEA net revenues in 2023 decreased 11%, primarily driven by lower results across businesses within the Institutional Securities business segment. •Asia net revenues in 2023 decreased 5%, primarily driven by lower results across businesses within the Institutional Securities business segment." }, { "status": "ADDED", "current_title": "Average tangible common equity2", "prior_title": null, "current_body": "ROTCE3 1.Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. See “Other Matters” herein for more information. 2.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity. 3.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment." }, { "status": "ADDED", "current_title": "Investments", "prior_title": null, "current_body": "Investments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions. Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions. Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, we consolidate certain sponsored Investment Management funds where revenues are primarily attributable to holders of noncontrolling interests." }, { "status": "ADDED", "current_title": "2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673", "prior_title": null, "current_body": "Fees1 Net Interest2 All Other3 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 Fees1 Net Interest2 All Other3 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 Fees1 Net Interest2 All Other3 1.Includes Commissions and fees and Asset management revenues. 2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues. Equity Net revenues of $9,986 million in 2023 decreased 7% compared with the prior year, reflecting decreases in Financing and Execution services. •Financing revenues decreased primarily due to higher funding and liquidity costs compared with the prior year. •Execution services revenues decreased primarily due to lower gains on inventory held to facilitate client activity in derivatives and cash equities and lower client activity in cash equities, partially offset by mark-to-market gains on business-related investments compared with losses in the prior year." }, { "status": "ADDED", "current_title": "Wealth Management Metrics", "prior_title": null, "current_body": "$ in billionsAt December 31,2023At December 31,2022Total client assets1$5,129$4,187U.S. Bank Subsidiary loans$147$146Margin and other lending2$21$22Deposits3$346$351Annualized weighted average cost of deposits4Period end2.92%1.59%Period average2.43%0.53% Total client assets1 Margin and other lending2 Deposits3 Annualized weighted average cost of deposits4 202320222021Net new assets$282.3$311.3$437.7 Net new assets 1.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. See “Advisor-Led Channel” and “Self-Directed Channel” herein for additional information. 2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities. 3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on our U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion off-balance sheet amounts were excluded from deposits. 4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2023 and December 31, 2022. The period average is based on daily balances and rates for the year." }, { "status": "ADDED", "current_title": "Transactional Revenues", "prior_title": null, "current_body": "Transactional revenues of $3,556 million in 2023 increased 44% compared with the prior year, primarily due to $282 million of gains on DCP investments compared with $858 million of losses in the prior year, partially offset by lower client activity. For further information on the impact of DCP, see “Selected Non-GAAP Financial Information” herein." }, { "status": "ADDED", "current_title": "Rollforwards", "prior_title": null, "current_body": "$ in billionsAtDec 31,2022Inflows1Outflows2Market Impact3Other4,5AtDec 31,2023 Equity$259 $40 $(57)$57 $(4)$295 Fixed Income173 56 (62)11 (7)171 Alternatives and Solutions431 108 (91)57 3 508 Long-Term AUM$863 $204 $(210)$125 $(8)$974 Liquidity and Overlay Services442 2,282 (2,244)20 (15)485 Total$1,305 $2,486 $(2,454)$145 $(23)$1,459 At Dec 31, 2022 Inflows1 Outflows2 Market Impact3 Other4,5 At Dec 31, 2023 Fixed Income Long-Term AUM $ in billionsAtDec 31,2021 Inflows1Outflows2Market Impact3Other4AtDec 31,2022 Equity$395 $56 $(74)$(106)$(12)$259 Fixed Income207 66 (78)(16)(6)173 Alternatives and Solutions466 102 (83)(47)(7)431 Long-Term AUM$1,068 $224 $(235)$(169)$(25)$863 Liquidity and Overlay Services497 2,224 (2,268)(6)(5)442 Total$1,565 $2,448 $(2,503)$(175)$(30)$1,305 At Dec 31, 2021 Inflows1 Outflows2 Market Impact3 Other4 At Dec 31, 2022 Fixed Income Long-Term AUM $ in billionsAtDec 31,2020Inflows1Outflows2Market Impact3Other4,6AtDec 31,2021Equity$242 $100 $(85)$34 $104 $395 Fixed Income98 67 (55)— 97 207 Alternatives and Solutions153 95 (78)51 245 466 Long-Term AUM$493 $262 $(218)$85 $446 $1,068 Liquidity and Overlay Services288 1,940 (1,852)6 115 497 Total$781 $2,202 $(2,070)$91 $561 $1,565 At Dec 31, 2020 Inflows1 Outflows2 Market Impact3 Other4,6 At Dec 31, 2021 1.Inflows represent investments or commitments from new and existing clients in new or existing investment products, including reinvestments of client dividends and increases in invested capital. Inflows exclude the impact of exchanges, whereby a client changes positions within the same asset class. 2.Outflows represent redemptions from clients’ funds, transition of funds from the committed capital period to the invested capital period and decreases in invested capital. Outflows exclude the impact of exchanges, whereby a client changes positions within the same asset class. 3.Market impact includes realized and unrealized gains and losses on portfolio investments. This excludes any funds where market impact does not impact management fees. 4.Other contains both distributions and foreign currency impact for all periods. Distributions represent decreases in invested capital due to returns of capital after the investment period of a fund. It also includes fund dividends that the client has not reinvested. Foreign currency impact reflects foreign currency changes for non-U.S. dollar dominated funds. 5.In 2023, our Retail Municipal and Corporate Fixed Income business (“FIMS”) was combined with our Parametric retail customized solutions business. The impact of the change was a $6 billion movement in AUM from Fixed Income to the Alternatives and Solutions asset class included in Other. 6.The 2021 Other amounts primarily include AUM additions related to the Eaton Vance Corp. (“Eaton Vance”) acquisition. Average AUM$ in billions202320222021Equity$279 $298 $362 Fixed income170 186 181 Alternatives and Solutions466 435 380 Long-Term AUM Subtotal915 919 923 Liquidity and Overlay Services464 462 430 Total AUM$1,379 $1,381 $1,353 Average Fee Rates1Fee rate in bps202320222021Equity71 70 74 Fixed income35 35 38 Alternatives and Solutions32 34 36 Long-Term AUM44 46 51 Liquidity and Overlay Services13 11 5 Total AUM34 34 37 1.Based on Asset management revenues, net of waivers, excluding performance-based fees and other non-management fees. For certain non-U.S. funds, it includes the portion of advisory fees that the advisor collects on behalf of third-party distributors. The payment of those fees to the distributor is included in Non-compensation expenses in the income statement.Asset management and other related fees within the Investment Management segment are primarily generated from Equity, Fixed Income and the following products:Alternatives and Solutions. Includes products in fund of funds, real estate, infrastructure, private equity and credit strategies and multi-asset portfolios, as well as systematic strategies that create custom investment solutions.Liquidity and Overlay Services. Includes liquidity fund products, as well as overlay services, which represent investment strategies that use passive exposure instruments to obtain, offset or substitute specific portfolio exposures, beyond those provided by the underlying holdings of the fund." }, { "status": "ADDED", "current_title": "Accounting Development Updates", "prior_title": null, "current_body": "The Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and determined to be either not applicable or to not have a material impact on our financial condition or results of operations upon adoption. We adopted the following accounting update on January 1, 2024, with no material impact on our financial condition or results of operations upon adoption: •Investments—Tax Credit Structures. This accounting update permits an election to account for tax equity investments using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and recognized net in the income statement as a component of provision for income taxes. The update requires a separate accounting policy election to be made for each tax credit program. Additional disclosures are required regarding (i) the nature of our tax equity investments and (ii) the effect of our tax equity investments and related income tax credits on the financial condition and results of operations. We are currently evaluating the following accounting updates; however, we do not expect a material impact on our financial condition or results of operations upon adoption: •Income Tax Disclosures. This accounting update requires disclosure of additional information in relation to income taxes, including additional disaggregation of the income tax rate reconciliation and income taxes paid. For the income tax rate reconciliation, this update requires (1) disclosure of specific categories of reconciling items; and (2) providing additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). For income taxes paid, this update requires disclosure of information, including (1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received), disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). Additionally, the update requires disclosure of (1) income (or loss) before income taxes, disaggregated between domestic and foreign; and (2) income taxes disaggregated by federal, state and foreign. The accounting update is effective for annual periods beginning January 1, 2025, with early adoption permitted. •Segment Reporting. This accounting update requires additional reportable segment disclosures on an annual and interim basis, primarily about significant segment expenses and other segment items that are regularly provided to the 45December 2023 Form 10-K 45December 2023 Form 10-K 45December 2023 Form 10-K 45 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents chief operating decision maker and included within the reported measure of segment profit or loss. This update does not change how operating segments are identified or aggregated, or how quantitative thresholds are applied to determine the reportable segments. The accounting update is effective for fiscal years beginning January 1, 2024, and interim periods within fiscal years beginning January 1, 2025, with early adoption permitted.Critical Accounting EstimatesOur financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity.Fair ValueFinancial Instruments Measured at Fair ValueA significant number of our financial instruments are carried at fair value. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting estimate. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to:•Trading assets and Trading liabilities;•Investment Securities—AFS;•Certain Securities purchased under agreements to resell;•Loans held-for-sale (measured at the lower of amortized cost or fair value);•Certain Deposits, primarily certificates of deposit;•Certain Securities sold under agreements to repurchase;•Certain Other secured financings; and•Certain Borrowings.Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.In determining fair value, we use various valuation approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable prices and inputs, and minimizes the use of unobservable prices and inputs by requiring that the relevant observable inputs be used when available. The hierarchy is broken down into three levels: wherein Level 1 represents quoted prices in active markets, Level 2 represents valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, require the greatest use of judgment. The fair values for the substantial majority of our financial assets and liabilities carried at fair value are based on observable prices and inputs and are classified in level 1 or 2, of the fair value hierarchy. Level 3 financial assets represented 1.2% and 1.4% of our total assets, as of December 31, 2023 and December 31, 2022, respectively. In periods of market disruption, the observability of prices and inputs, as well as market liquidity, may be reduced for many instruments, which could cause an instrument to be recategorized from Level 1 to Level 2 or from Level 2 to Level 3. In addition, a downturn in market conditions could lead to declines in the valuation of many instruments carried at fair value. Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. For further information on the definition of fair value, Level 1, Level 2, Level 3 and related valuation techniques, and quantitative information about and sensitivity of significant unobservable inputs used in Level 3 fair value measurements, see Notes 2 and 4 to the financial statements.Where appropriate, valuation adjustments are made to account for various factors, such as liquidity risk (bid-ask adjustments), credit quality, model uncertainty, concentration risk and funding, in order to arrive at fair value. For a further discussion of valuation adjustments that we apply, see Note 2 to the financial statements.Goodwill and Intangible AssetsGoodwillWe test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill.For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case, the quantitative test would be performed.When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, chief operating decision maker and included within the reported measure of segment profit or loss. This update does not change how operating segments are identified or aggregated, or how quantitative thresholds are applied to determine the reportable segments. The accounting update is effective for fiscal years beginning January 1, 2024, and interim periods within fiscal years beginning January 1, 2025, with early adoption permitted.Critical Accounting EstimatesOur financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity.Fair ValueFinancial Instruments Measured at Fair ValueA significant number of our financial instruments are carried at fair value. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting estimate. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to:•Trading assets and Trading liabilities;•Investment Securities—AFS;•Certain Securities purchased under agreements to resell;•Loans held-for-sale (measured at the lower of amortized cost or fair value);•Certain Deposits, primarily certificates of deposit;•Certain Securities sold under agreements to repurchase;•Certain Other secured financings; and•Certain Borrowings.Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.In determining fair value, we use various valuation approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable prices and inputs, and minimizes the use of unobservable prices and inputs by requiring that the relevant observable inputs be used when available. The hierarchy is broken down into three levels: wherein Level 1 represents quoted prices in active markets, Level 2 represents valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, require the greatest use of judgment. The fair values for the substantial majority of our financial assets and liabilities carried at fair value are based on observable prices and inputs and are classified in level 1 or 2, of the fair value chief operating decision maker and included within the reported measure of segment profit or loss. This update does not change how operating segments are identified or aggregated, or how quantitative thresholds are applied to determine the reportable segments. The accounting update is effective for fiscal years beginning January 1, 2024, and interim periods within fiscal years beginning January 1, 2025, with early adoption permitted." }, { "status": "ADDED", "current_title": "Liquidity and Capital Resources", "prior_title": null, "current_body": "Our liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and the Board. Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Corporate Treasury department (“Treasury”), Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the BRC. December 2023 Form 10-K48 December 2023 Form 10-K48 December 2023 Form 10-K48 48 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Balance SheetWe monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments.We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage.Total Assets by Business SegmentAt December 31, 2023$ in millionsISWMIMTotalAssetsCash and cash equivalents$72,928 $16,172 $132 $89,232 Trading assets at fair value353,841 7,962 5,271 367,074 Investment securities39,212 115,595 — 154,807 Securities purchased under agreements to resell90,701 20,039 — 110,740 Securities borrowed119,823 1,268 — 121,091 Customer and other receivables47,333 31,237 1,535 80,105 Loans172,110 146,526 4 218,640 Goodwill424 10,199 6,084 16,707 Intangible assets26 3,427 3,602 7,055 Other assets214,108 12,743 1,391 28,242 Total assets$810,506 $365,168 $18,019 $1,193,693 At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 — 159,931 Securities purchased under agreements to resell102,511 11,396 — 113,907 Securities borrowed132,619 755 — 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Goodwill429 10,202 6,021 16,652 Intangible assets36 3,911 3,671 7,618 Other assets215,324 10,356 1,302 26,982 Total assets$789,837 $373,305 $17,089 $1,180,231 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements).2.Other assets primarily includes premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets.A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022.Liquidity Risk Management FrameworkThe primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.The following principles guide our Liquidity Risk Management Framework:•Sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) should be maintained to cover maturing liabilities and other planned and contingent outflows;•Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;•Source, counterparty, currency, region and term of funding should be diversified; and•Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding.The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.Required Liquidity FrameworkOur Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.Liquidity Stress TestsWe use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets; Balance SheetWe monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments.We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage.Total Assets by Business SegmentAt December 31, 2023$ in millionsISWMIMTotalAssetsCash and cash equivalents$72,928 $16,172 $132 $89,232 Trading assets at fair value353,841 7,962 5,271 367,074 Investment securities39,212 115,595 — 154,807 Securities purchased under agreements to resell90,701 20,039 — 110,740 Securities borrowed119,823 1,268 — 121,091 Customer and other receivables47,333 31,237 1,535 80,105 Loans172,110 146,526 4 218,640 Goodwill424 10,199 6,084 16,707 Intangible assets26 3,427 3,602 7,055 Other assets214,108 12,743 1,391 28,242 Total assets$810,506 $365,168 $18,019 $1,193,693 At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 — 159,931 Securities purchased under agreements to resell102,511 11,396 — 113,907 Securities borrowed132,619 755 — 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Goodwill429 10,202 6,021 16,652 Intangible assets36 3,911 3,671 7,618 Other assets215,324 10,356 1,302 26,982 Total assets$789,837 $373,305 $17,089 $1,180,231 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements).2.Other assets primarily includes premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets.A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of" }, { "status": "ADDED", "current_title": "Liquidity Resources by Bank and Non-Bank Legal Entities", "prior_title": null, "current_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Bank legal entitiesU.S.$132,870 $132,663 Non-U.S.5,359 6,101 Total Bank legal entities138,229 138,764 Non-Bank legal entitiesU.S.:Parent Company58,494 53,681 Non-Parent Company56,459 58,839 Total U.S.114,953 112,520 Non-U.S.61,322 56,083 Total Non-Bank legal entities176,275 168,603 Total Liquidity Resources$314,504 $307,367 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt, and estimates of funding needs in a stressed environment, among other factors." }, { "status": "ADDED", "current_title": "Net Stable Funding Ratio", "prior_title": null, "current_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Available stable funding$555,884 $553,413 Required stable funding465,226 468,290 NSFR120 %118 % Available stable funding" }, { "status": "ADDED", "current_title": "Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 16, 2024", "prior_title": null, "current_body": "Parent CompanyShort-Term DebtLong-Term DebtRating OutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1A+StableS&P Global RatingsA-2A-Stable MSBNAShort-Term DebtLong-Term DebtRating OutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-Term DebtLong-Term DebtRating OutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+Stable" }, { "status": "ADDED", "current_title": "Common Stock Repurchases", "prior_title": null, "current_body": "in millions, except for per share data202320222021Number of shares62 113 126 Average price per share$85.35 $87.25 $91.13 Total$5,300 $9,865 $11,464 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 17 to the financial statements. For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein." }, { "status": "ADDED", "current_title": "FDIC Final Rulemaking on Special Assessment", "prior_title": null, "current_body": "Following the failures of certain banks and resulting losses to the FDIC’s Deposit Insurance Fund in the first half of 2023, the FDIC adopted a final rule on November 16, 2023 to implement a special assessment to recover the cost associated with protecting uninsured depositors. Under the final rule, the assessment base for the special assessment is equal to an IDI’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The $5 billion exclusion is applied once to the aggregate uninsured deposits of our U.S. Bank Subsidiaries. The final rule provides that, starting in 2024, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points over eight quarterly assessment periods, subject to change depending on any adjustments to the loss estimate, mergers, failures, or amendments to reported estimates of uninsured deposits. We recorded the cost of the entire special assessment of $286 million in Non-interest expenses when the final rule was published in the Federal Register, in the fourth quarter of 2023." }, { "status": "ADDED", "current_title": "Basel III Endgame Proposal", "prior_title": null, "current_body": "On July 27, 2023, U.S. banking agencies proposed revisions to risk-based capital and related standards applicable to us and our U.S. Bank Subsidiaries (“Basel III Endgame Proposal”). The proposal would introduce a new measure of RWAs known as “Expanded Total RWAs” (the “Expanded Approach”), reflecting new RWA methodologies that generally align with changes to the global Basel Accord adopted by the Basel Committee. The proposal would eliminate the current capital rule’s Advanced Approach and effectively replace it with the Expanded Approach, which more heavily relies on standardized methodologies. As compared with the Standardized Approach, the Expanded Approach includes more granular risk weights for credit risk and introduces a new market risk framework. In addition, unlike the Standardized Approach, the Expanded Approach includes operational risk and credit valuation adjustment RWA components. The Basel III Endgame Proposal, if adopted as a final rule, would maintain the current capital rule’s dual-requirement structure, whereby we and our U.S. Bank Subsidiaries would be required to calculate our risk-based capital ratios under both the Expanded Approach and the Standardized Approach. In addition, the proposal would modify the Standardized Approach by requiring that the new market risk standards from the proposal also be applied in the Standardized Approach. The Basel III Endgame Proposal would apply the SCB and G-SIB surcharge to risk-based capital requirements calculated under both the Expanded Approach and the Standardized Approach. The proposal includes a proposed effective date of July 1, 2025, with three-year transition arrangements until revised standards are fully phased in on July 1, 2028.Based on our current understanding of the Basel III Endgame Proposal, we estimate that, if the Expanded Approach had applied on a fully phased-in basis as of December 31, 2023, and in the absence of taking any actions to mitigate its impact, our Expanded Approach RWAs as of that date would have been approximately 40% higher than our actual Standardized Approach RWAs as of that date.The increase in RWAs resulting from the Expanded Approach would result, assuming all other surcharge elements remained unchanged, in a lower SCB and lower G-SIB Method 2 surcharge as compared with current surcharges, as RWAs are included in the denominators of the relevant calculations for each buffer. Lower surcharges would, therefore, partially decrease the otherwise higher regulatory capital requirements under the Expanded Approach. The proposal would phase in the higher Expanded Approach RWAs on July 1 of each year during the transition, thereby increasing our regulatory capital requirements, with delayed incorporation of the potentially lower SCB and G-SIB Method 2 capital surcharge calculations.Any estimate of how the Expanded Approach may impact us is a forward-looking statement and subject to uncertainty, as actual results may differ from the anticipated results and may be materially affected by and dependent on a range of factors, including business performance, future capital actions, the results of future supervisory stress tests, and potential modifications to the proposal by the U.S. banking agencies in a final rulemaking. The Firm does not undertake to update any forward-looking statement.G-SIB Surcharge ProposalOn July 27, 2023, the Federal Reserve proposed revisions to the G-SIB capital surcharge framework applicable to us (“G-SIB Surcharge Proposal”). The G-SIB Surcharge Proposal includes various technical revisions to the G-SIB capital surcharge methodology and would revise the resulting includes operational risk and credit valuation adjustment RWA components. The Basel III Endgame Proposal, if adopted as a final rule, would maintain the current capital rule’s dual-requirement structure, whereby we and our U.S. Bank Subsidiaries would be required to calculate our risk-based capital ratios under both the Expanded Approach and the Standardized Approach. In addition, the proposal would modify the Standardized Approach by requiring that the new market risk standards from the proposal also be applied in the Standardized Approach. The Basel III Endgame Proposal would apply the SCB and G-SIB surcharge to risk-based capital requirements calculated under both the Expanded Approach and the Standardized Approach. The proposal includes a proposed effective date of July 1, 2025, with three-year transition arrangements until revised standards are fully phased in on July 1, 2028. Based on our current understanding of the Basel III Endgame Proposal, we estimate that, if the Expanded Approach had applied on a fully phased-in basis as of December 31, 2023, and in the absence of taking any actions to mitigate its impact, our Expanded Approach RWAs as of that date would have been approximately 40% higher than our actual Standardized Approach RWAs as of that date. The increase in RWAs resulting from the Expanded Approach would result, assuming all other surcharge elements remained unchanged, in a lower SCB and lower G-SIB Method 2 surcharge as compared with current surcharges, as RWAs are included in the denominators of the relevant calculations for each buffer. Lower surcharges would, therefore, partially decrease the otherwise higher regulatory capital requirements under the Expanded Approach. The proposal would phase in the higher Expanded Approach RWAs on July 1 of each year during the transition, thereby increasing our regulatory capital requirements, with delayed incorporation of the potentially lower SCB and G-SIB Method 2 capital surcharge calculations. Any estimate of how the Expanded Approach may impact us is a forward-looking statement and subject to uncertainty, as actual results may differ from the anticipated results and may be materially affected by and dependent on a range of factors, including business performance, future capital actions, the results of future supervisory stress tests, and potential modifications to the proposal by the U.S. banking agencies in a final rulemaking. The Firm does not undertake to update any forward-looking statement." }, { "status": "ADDED", "current_title": "G-SIB Surcharge Proposal", "prior_title": null, "current_body": "On July 27, 2023, the Federal Reserve proposed revisions to the G-SIB capital surcharge framework applicable to us (“G-SIB Surcharge Proposal”). The G-SIB Surcharge Proposal includes various technical revisions to the G-SIB capital surcharge methodology and would revise the resulting 59December 2023 Form 10-K 59December 2023 Form 10-K 59December 2023 Form 10-K 59 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Method 2 G-SIB capital surcharge from 0.5-percentage point increments to 0.1-percentage point increments. The G-SIB Surcharge Proposal includes a proposed effective date two calendar quarters after the date of adoption of a final rule by the Federal Reserve. We continue to evaluate the G-SIB Surcharge Proposal and the potential impacts, if adopted, on our capital requirements and our Required Capital framework. Method 2 G-SIB capital surcharge from 0.5-percentage point increments to 0.1-percentage point increments. The G-SIB Surcharge Proposal includes a proposed effective date two calendar quarters after the date of adoption of a final rule by the Federal Reserve. We continue to evaluate the G-SIB Surcharge Proposal and the potential impacts, if adopted, on our capital requirements and our Required Capital framework. Method 2 G-SIB capital surcharge from 0.5-percentage point increments to 0.1-percentage point increments. The G-SIB Surcharge Proposal includes a proposed effective date two calendar quarters after the date of adoption of a final rule by the Federal Reserve. We continue to evaluate the G-SIB Surcharge Proposal and the potential impacts, if adopted, on our capital requirements and our Required Capital framework. December 2023 Form 10-K60 December 2023 Form 10-K60 December 2023 Form 10-K60 60 Table of Contents Table of Contents Table of Contents" }, { "status": "ADDED", "current_title": "Head of Non-Financial Risk", "prior_title": null, "current_body": "The Head of Non-Financial Risk, who is independent of business units, reports to the Chief Legal Officer and Chief Administrative Officer. The Head of Non-Financial Risk oversees the compliance, financial crimes and operational risk management functions; independently reviews non-financial risks, including compliance (including conduct), financial crimes, and operational (including cybersecurity) risks, as well as material regulatory risks; and reviews results of risk management processes with the Board, the BAC, the BOTC and the BRC as appropriate. The Head of Non-Financial Risk also coordinates with the Chief Risk Officer regarding financial risks." }, { "status": "ADDED", "current_title": "Internal Audit Department", "prior_title": null, "current_body": "The Internal Audit Department (“IAD”) independently identifies and assesses risks facing the Firm and provides independent, objective and timely assurance to stakeholders about the effectiveness of risk management, governance and controls over key risks within the Firm’s businesses and functions. IAD develops and executes a comprehensive risk-based assurance plan to fulfill its role and purpose, which includes assessing compliance with policies, procedures and laws and regulations. IAD may also conduct other activities, such as retrospective reviews, pre-implementation reviews and investigations as requested by the BAC, senior management or the Firm’s regulators. IAD executes its activities in accordance with the mandatory elements of The Institute of Internal Auditors’ International Professional Practices Framework as well as the Firm’s Code of Ethics and Business Conduct, regulatory requirements, and IAD’s policies, procedures, standards and guidance. The Chief Audit Officer, who reports functionally to the BAC and administratively to the Firm’s Chief Executive Officer, communicates the results of IAD activities to the BAC on a quarterly basis and periodically to the BRC and BOTC." }, { "status": "ADDED", "current_title": "Market Risk", "prior_title": null, "current_body": "Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. We have direct exposure to market risk. In addition, market risk may also impact our clients and markets in a manner that may indirectly impact us. For more information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”" }, { "status": "ADDED", "current_title": "Loans and Lending Commitments", "prior_title": null, "current_body": "At December 31, 2023$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,758 $11,862 $— $18,620 Secured lending facilities39,498 3,161 — 42,659 Commercial and Residential real estate8,678 209 3,331 12,218 Securities-based lending and Other2,818 — 4,402 7,220 Total Institutional Securities57,752 15,232 7,733 80,717 Wealth Management:Residential real estate60,375 22 — 60,397 Securities-based lending and Other86,423 1 — 86,424 Total Wealth Management146,798 23 — 146,821 Total Investment Management24 — 455 459 Total loans204,554 15,255 8,188 227,997 ACL(1,169)(1,169)Total loans, net of ACL$203,385 $15,255 $8,188 $226,828 Lending commitments3$149,973 Total exposure$376,801 FVO1" }, { "status": "ADDED", "current_title": "Forecasted U.S. Real GDP Growth Rates in Base Scenario", "prior_title": null, "current_body": "4Q 20244Q 2025Year-over-year growth rate0.9 %2.0 % See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL." }, { "status": "ADDED", "current_title": "Institutional Securities Loans and Lending Commitments1", "prior_title": null, "current_body": "At December 31, 2023 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$3 $11 $216 $— $230 A1,054 950 182 — 2,186 BBB7,117 10,076 346 — 17,539 BB11,723 16,367 1,775 277 30,142 Other NIG9,586 12,961 2,924 156 25,627 Unrated2111 1,036 62 2,910 4,119 Total loans, net of ACL29,594 41,401 5,505 3,343 79,843 Lending commitmentsAAA— 50 — — 50 AA2,610 3,064 154 — 5,828 A7,704 21,256 593 — 29,553 BBB9,161 46,304 106 — 55,571 BB4,069 16,431 1,594 414 22,508 Other NIG1,916 13,842 1,077 3 16,838 Unrated26 7 — — 13 Total lendingcommitments25,466 100,954 3,524 417 130,361 Total exposure$55,060 $142,355 $9,029 $3,760 $210,204 Unrated2 Unrated2" }, { "status": "ADDED", "current_title": "commitments", "prior_title": null, "current_body": "At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 Unrated2 Unrated2" }, { "status": "ADDED", "current_title": "Institutional Securities Loans and Lending Commitments by Industry", "prior_title": null, "current_body": "$ in millionsAtDecember 31,2023AtDecember 31,2022Financials$57,804 $54,222 Real estate35,342 32,358 Industrials18,056 14,557 Communications services15,301 15,336 Healthcare14,274 12,353 Information technology12,430 13,790 Consumer discretionary12,190 11,592 Utilities11,522 10,542 Consumer staples9,305 7,823 Energy9,156 9,115 Materials6,503 6,102 Insurance6,486 5,925 Other1,835 1,831 Total exposure$210,204 $195,546" }, { "status": "ADDED", "current_title": "Institutional Securities Commercial Real Estate Loans and Lending Commitments", "prior_title": null, "current_body": "By Region At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalAmericas$5,410 $289 $5,699 $6,320 $378 $6,698 EMEA3,127 56 3,183 3,040 79 3,119 Asia485 — 485 445 5 450 Total$9,022 $345 $9,367 $9,805 $462 $10,267 Loans1 LC1 Loans1 LC1 Total" }, { "status": "ADDED", "current_title": "Year Ended December 31, 2023", "prior_title": null, "current_body": "CRE Beginning balance Gross charge-offs Recoveries Provision (release)" }, { "status": "ADDED", "current_title": "ACL—Lending commitments", "prior_title": null, "current_body": "Beginning balance Provision (release) Ending balance CRE—Commercial real estate Institutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2023 AtDecember 31,2022 Corporate3.6 %3.6 %Secured lending facilities0.4 %0.4 %Commercial real estate5.3 %3.2 %Securities-based lending and Other0.6 %0.4 %Total Institutional Securities loans1.5 %1.3 %" }, { "status": "ADDED", "current_title": "Wealth Management Commercial Real Estate Loans and Lending Commitments by Property Type", "prior_title": null, "current_body": "At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 — 454 330 — 330 Hotel400 — 400 419 — 419 Other253 — 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 Loans1 LC1 Loans1 LC1 Total LC–Lending Commitments 1.Amounts include HFI loans and lending commitments. HFI loans are presented net of ACL. As of December 31, 2023 and December 31, 2022, our direct lending against CRE totaled $7.1 billion and $6.6 billion within the Wealth Management business segment, which represents 4.3% and 4.0% of total exposure reflected in the Wealth Management Loans and Lending Commitments table above, primarily included within Securities-based lending and Other loans. Such loans are originated through our private banking platform, are both secured and generally benefiting from full or partial guarantees from high or ultra-high net worth clients, which partially reduce associated credit risk. At both December 31, 2023 and December 31, 2022, greater than 95% of the CRE loans balance in the Wealth Management business segment received guarantees. All of our lending against CRE properties within Wealth Management are in the Americas region." }, { "status": "REMOVED", "current_title": null, "prior_title": "A default by a large financial institution could adversely affect financial markets.", "prior_body": "The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearing houses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearing houses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”" }, { "status": "REMOVED", "current_title": null, "prior_title": "Liquidity Risk", "prior_body": "Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”" }, { "status": "REMOVED", "current_title": null, "prior_title": "Strategic Transactions", "prior_body": "•On March 1, 2021, we completed the acquisition of Eaton Vance. For further information, see “Business Segments—Investment Management” herein and Note 3 to the financial statements. •On October 2, 2020, we completed the acquisition of E*TRADE. For further information, see “Business Segments—Wealth Management” herein and Note 3 to the financial statements. Net Revenues($ in millions)Net Income Applicable to Morgan Stanley($ in millions)Earnings per Diluted Common Share11.Adjusted Diluted EPS was $6.36, $8.22 and $6.58 in 2022, 2021 and 2020, respectively (see “Selected Non-GAAP Financial Information” herein).2022 Compared with 2021 •We reported net revenues of $53.7 billion in 2022 compared with $59.8 billion in 2021. For 2022, net income applicable to Morgan Stanley was $11.0 billion, or $6.15 per diluted common share, compared with $15.0 billion, or $8.03 per diluted common share in 2021." }, { "status": "REMOVED", "current_title": null, "prior_title": "Earnings per Diluted Common Share1", "prior_body": "1.Adjusted Diluted EPS was $6.36, $8.22 and $6.58 in 2022, 2021 and 2020, respectively (see “Selected Non-GAAP Financial Information” herein)." }, { "status": "REMOVED", "current_title": null, "prior_title": "Non-interest Expenses1", "prior_body": "($ in millions) 1.The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total. •Compensation and benefits expenses of $23,053 million in 2022 decreased 6% from the prior year, primarily due to lower expenses related to certain deferred cash-based compensation plans linked to investment performance, lower discretionary incentive compensation on lower revenues, and lower stock-based compensation expense driven by the Firm’s share price, partially offset by higher salary expenses driven in part by the impact of higher headcount. 2022 Compensation and benefits expenses included $133 million associated with a December employee action recorded in the fourth quarter of 2022. •Non-compensation expenses of $16,246 million in 2022 increased 5% from the prior year, primarily due to an increased spend on technology and higher legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022." }, { "status": "REMOVED", "current_title": null, "prior_title": "Russia and Ukraine War", "prior_body": "We continue to monitor the war in Ukraine and its impact on both the Ukrainian and Russian economies, as well as related impacts on other world economies and the financial markets. Our direct exposure to both Russia and Ukraine remains limited. We are not entering any new business onshore in Russia and our activities in Russia are limited to helping global clients address and close out pre-existing obligations. Refer to “Risk Factors” and “Forward-Looking Statements” for more information on the potential effects of geopolitical events and acts of war or aggression." }, { "status": "REMOVED", "current_title": null, "prior_title": "Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures", "prior_body": "$ in millions, except per share data202220212020Net revenues$53,668 $59,755 $48,757 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans11,198 (389)(823)Adjusted Net revenues—non-GAAP$54,866 $59,366 $47,934 Compensation expense$23,053 $24,628 $20,854 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1716 (526)(856)Adjusted Compensation expense—non-GAAP$23,769 $24,102 $19,998 Wealth Management Net revenues$24,417 $24,243 $19,086 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1858 (210)(563)Adjusted Wealth Management Net revenues—non-GAAP$25,275 $24,033 $18,523 Wealth Management Compensation expense$12,534 $13,090 $10,970 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1530 (293)(516)Adjusted Wealth Management Compensation expense—non-GAAP$13,064 $12,797 $10,454 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Impact of adjustments:Wealth Management—Compensation expenses12 58 151 Wealth Management—Non-compensation expenses345 288 80 Investment Management—Compensation expenses29 44 — Investment Management—Non-compensation expenses84 66 — Total integration-related expenses470 456 231 Related tax benefit(110)(104)(42)Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP2$10,900 $14,918 $10,689 Earnings per diluted common share$6.15 $8.03 $6.46 Impact of adjustments0.21 0.19 0.12 Adjusted earnings per diluted common share—non-GAAP2$6.36 $8.22 $6.58 Expense efficiency ratio73 %67 %69 %Impact of adjustments(1)%(1)%(1)%Adjusted expense efficiency ratio—non-GAAP272 %66 %68 %Wealth Management pre-tax margin27 %25 %23 %Impact of adjustments1 %2 %1 %Adjusted Wealth Management pre-tax margin—non-GAAP228 %27 %24 %Investment Management pre-tax margin15 %27 %23 %Impact of adjustments2 %2 %— %Adjusted Investment Management pre-tax margin—non-GAAP217 %29 %23 % Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1 Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP2 Adjusted earnings per diluted common share—non-GAAP2 Adjusted expense efficiency ratio—non-GAAP2 Adjusted Wealth Management pre-tax margin—non-GAAP2 Adjusted Investment Management pre-tax margin—non-GAAP2 At December 31,$ in millions202220212020Tangible equityCommon shareholders’ equity$91,391 $97,691 $92,531 Less: Goodwill and net intangible assets(24,268)(25,192)(16,615)Tangible common shareholders’ equity—non-GAAP$67,123 $72,499 $75,916 Average Monthly Balance$ in millions202220212020Tangible equityCommon shareholders’ equity$93,873 $97,094 $80,246 Less: Goodwill and net intangible assets(24,789)(23,392)(10,951)Tangible common shareholders’ equity—non-GAAP$69,084 $73,702 $69,295 $ in billions202220212020Average common equityUnadjusted—GAAP$93.9 $97.1 $80.2 Adjusted2—Non-GAAP94.0 97.2 80.3 ROE3Unadjusted—GAAP11.2 %15.0 %13.1 %Adjusted2—Non-GAAP11.6 %15.3 %13.3 %Average tangible common equity—Non-GAAPUnadjusted$69.1 $73.7 $69.3 Adjusted269.3 73.8 69.3 ROTCE3—Non-GAAPUnadjusted15.3 %19.8 %15.2 %Adjusted215.7 %20.2 %15.4 %Non-GAAP Financial Measures by Business Segment$ in billions202220212020Average common equity4Institutional Securities$48.8 $43.5 $42.8 Wealth Management31.0 28.6 20.8 Investment Management10.6 8.8 2.6 ROE5Institutional Securities10 %20 %15 %Wealth Management16 %16 %16 %Investment Management6 %15 %23 %Average tangible common equity4Institutional Securities$48.3 $42.9 $42.3 Wealth Management16.3 13.4 11.3 Investment Management0.8 0.9 1.7 ROTCE5Institutional Securities10 %20 %16 %Wealth Management31 %34 %29 %Investment Management86 %144 %36 %1.Net revenues and compensation expense are adjusted for certain employee deferred cash-based compensation plans for both Firm and Wealth Management business segment. See “Other Matters” herein for more information.2.Adjusted amounts exclude the effect of costs related to the integrations of E*TRADE and Eaton Vance, net of tax as appropriate. 3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted.4.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see \"Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity. 5.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment. Average Monthly Balance$ in millions202220212020Tangible equityCommon shareholders’ equity$93,873 $97,094 $80,246 Less: Goodwill and net intangible assets(24,789)(23,392)(10,951)Tangible common shareholders’ equity—non-GAAP$69,084 $73,702 $69,295 $ in billions202220212020Average common equityUnadjusted—GAAP$93.9 $97.1 $80.2 Adjusted2—Non-GAAP94.0 97.2 80.3 ROE3Unadjusted—GAAP11.2 %15.0 %13.1 %Adjusted2—Non-GAAP11.6 %15.3 %13.3 %Average tangible common equity—Non-GAAPUnadjusted$69.1 $73.7 $69.3 Adjusted269.3 73.8 69.3 ROTCE3—Non-GAAPUnadjusted15.3 %19.8 %15.2 %Adjusted215.7 %20.2 %15.4 % Adjusted2—Non-GAAP ROE3 Adjusted2—Non-GAAP Adjusted2" }, { "status": "REMOVED", "current_title": null, "prior_title": "Asset Management", "prior_body": "Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products. Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested. Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized annually." }, { "status": "REMOVED", "current_title": null, "prior_title": "Fixed Income", "prior_body": "Net revenues of $9,022 million in 2022 increased 20% compared with the prior year, primarily reflecting an increase in global macro products, which benefited from strong client engagement and increased client flow activity in an environment characterized by inflationary pressures, central bank actions and fiscal activity driving higher volatility. •Global macro products revenues increased in rates and foreign exchange products, primarily due to the positive impact of market conditions on inventory held to facilitate client activity and increased client activity. •Credit products revenues decreased, reflecting the impact of widening credit spreads and market volatility, primarily due to the impact of market conditions on inventory held to facilitate client activity in securitized products. •Commodities products and other fixed income revenues increased primarily due to higher client activity in Commodities." }, { "status": "REMOVED", "current_title": null, "prior_title": "Acquisition of E*TRADE", "prior_body": "The comparisons of current year results to prior periods are impacted by the acquisition of E*TRADE on October 2, 2020. For additional information on the acquisition of E*TRADE, see Note 3 to the financial statements." }, { "status": "REMOVED", "current_title": null, "prior_title": "Asset Management", "prior_body": "Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products. Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested. Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized annually." }, { "status": "REMOVED", "current_title": null, "prior_title": "Morgan Stanley", "prior_body": "1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues." }, { "status": "REMOVED", "current_title": null, "prior_title": "Rollforwards", "prior_body": "$ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotalDecember 31, 2021$395 $207 $466 $1,068 $497 $1,565 Inflows56 66 102 224 2,224 2,448 Outflows(74)(78)(83)(235)(2,268)(2,503)Market Impact(106)(16)(47)(169)(6)(175)Other(12)(6)(7)(25)(5)(30)December 31, 2022$259 $173 $431 $863 $442 $1,305 $ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotalDecember 31, 2020$242 $98 $153 $493 $288 $781 Inflows100 67 95 262 1,940 2,202 Outflows(85)(55)(78)(218)(1,852)(2,070)Market Impact34 — 51 85 6 91 Acquired1119 103 251 473 116 589 Other(15)(6)(6)(27)(1)(28)December 31, 2021$395 $207 $466 $1,068 $497 $1,565 Acquired1 $ in billionsEquityFixed IncomeAlternatives and SolutionsLong-Term AUM SubtotalLiquidity and Overlay ServicesTotalDecember 31, 2019$138 $79 $139 $356 $196 $552 Inflows87 37 26 150 1,584 1,734 Outflows(51)(29)(24)(104)(1,493)(1,597)Market Impact69 4 5 78 1 79 Other(1)7 7 13 — 13 December 31, 2020$242 $98 $153 $493 $288 $781 1.Related to the Eaton Vance acquisition." }, { "status": "REMOVED", "current_title": null, "prior_title": "Accounting Development Updates", "prior_body": "The Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and either determined to be not applicable or to not have a material impact on our financial condition or results of operations upon adoption. We adopted the following accounting updates on January 1, 2023: •Financial Instruments—Credit Losses. This accounting update eliminates the accounting guidance for Troubled Debt Restructurings (“TDRs”) and requires new disclosures regarding certain modifications of financing receivables (i.e., principal forgiveness, interest rate reductions, other-than-insignificant payment delays and term extensions) to borrowers experiencing financial difficulty. The update also requires disclosure of current period gross charge-offs by year of origination for financing receivables measured at amortized cost. We adopted this update on a prospective basis and noted no impact on our financial condition or results of operation upon adoption. We are currently evaluating the following accounting update, however, we do not expect a material impact on our financial condition or results of operations upon adoption: •Fair Value Measurement. This accounting update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The update also requires additional disclosures including the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction and circumstances that could cause the restriction to lapse. The ASU is effective January 1, 2024 with early adoption permitted." }, { "status": "REMOVED", "current_title": null, "prior_title": "Liquidity and Capital Resources", "prior_body": "Our liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and the Board of Directors (“Board”). Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Treasury department, Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the Risk Committee of the Board." }, { "status": "REMOVED", "current_title": null, "prior_title": "Liquidity Coverage Ratio and Net Stable Funding Ratio", "prior_body": "We and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR requires that large banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR requires large banking organizations to maintain sufficiently stable sources of funding over a one-year time horizon. As of December 31, 2022, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%." }, { "status": "REMOVED", "current_title": null, "prior_title": "Credit Ratings", "prior_body": "We rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.”" }, { "status": "REMOVED", "current_title": null, "prior_title": "Capital Management", "prior_body": "We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses." }, { "status": "REMOVED", "current_title": null, "prior_title": "Covered Fund Restrictions under the Volcker Rule", "prior_body": "The Volcker Rule prohibits certain investments and relationships by banking entities with covered funds, as defined in the Volcker Rule. During the current quarter, we have continued our assessment of conformance options permitted under the Volcker Rule with respect to certain legacy illiquid funds for which we previously received a conformance extension until July 21, 2023. These conformance options include, but are not limited to, restructuring our investments, selling a portion or all of our interests in certain legacy illiquid funds and relying on other applicable exemptions and exclusions under the Volcker Rule. As of December 31, 2022, the carrying value of our investments in those legacy illiquid funds approximated $230 million. Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate BenchmarksCentral banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and is a multi-year initiative.The publication of most non-U.S. dollar LIBOR rates ceased as of the end of December 2021, although certain Sterling and Yen LIBOR rates have been published for a limited period following this date on the basis of a “synthetic” methodology (known as “synthetic LIBOR”). The synthetic Yen LIBOR rates ceased as of the end of December 2022 and the U.K. Financial Conduct Authority (“UK FCA”), which regulates the publisher of LIBOR (ICE Benchmark Administration), has announced that publication of the one- and six-month tenors of synthetic Sterling LIBOR will cease at the end of March 2023 and the three-month synthetic Sterling LIBOR at the end of March 2024.U.S. dollar LIBOR rates are expected to cease being published as of the end of June 2023. On March 15, 2022 the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain U.S. law-governed contracts under certain circumstances with a SOFR-based rate identified in a Federal Reserve rule plus a statutory spread adjustment. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of any state or local law, statute, rule, regulation or standard. In addition, the UK FCA is considering the continued publication of the one-, three- and six-month tenors of U.S. dollar LIBOR on a synthetic basis until the end of September 2024. This may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation to remain on synthetic U.S. dollar LIBOR until the end of this period.As of December 31, 2022, our LIBOR-referenced contracts were primarily concentrated in derivative contracts and, to a lesser extent, loans, floating rate notes, preferred shares, securitizations and mortgages. A significant majority of our derivative contracts, and a majority of our non-derivative contracts, contain fallback provisions or otherwise have an expected path that will allow for the transition to an alternative reference rate upon the cessation of the applicable LIBOR rate. While we have made substantial progress in the transition away from the IBORs, we nonetheless currently remain party to a significant number of U.S. dollar LIBOR-linked As of December 31, 2022, the carrying value of our investments in those legacy illiquid funds approximated $230 million." }, { "status": "REMOVED", "current_title": null, "prior_title": "Internal Audit Department", "prior_body": "The Internal Audit Department (“IAD”) independently assesses the Firm’s risk management processes and controls using methodology developed from professional auditing standards and regulatory guidance. IAD undertakes these responsibilities through periodic reviews of our business activities, operations and systems, as well as special investigations and retrospective reviews that may be specifically requested by the BAC or management. In addition to regular reports to the BAC, the Chief Audit Officer, who reports functionally to the BAC and administratively to the Chief Executive Officer, periodically reports to the BRC and BOTC on various matters of risks and controls.Culture, Values and Conduct of EmployeesEmployees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, control functions such as Risk Management and Compliance, and Internal Audit).The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Firm’s Corporate Governance Policies. Our Culture, Values and Conduct Committee, along with the Compliance and Conduct Risk Committee, are the senior management committees that oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of this program is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing Conduct Risk (i.e., the risk arising from misconduct by employees or contingent workers) and Conduct Risk incidents at the Firm.The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current year compensation and/or prior year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Management committees from control functions periodically meet to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions. responsibilities through periodic reviews of our business activities, operations and systems, as well as special investigations and retrospective reviews that may be specifically requested by the BAC or management. In addition to regular reports to the BAC, the Chief Audit Officer, who reports functionally to the BAC and administratively to the Chief Executive Officer, periodically reports to the BRC and BOTC on various matters of risks and controls." }, { "status": "REMOVED", "current_title": null, "prior_title": "Risk Management Process", "prior_body": "In subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs." }, { "status": "REMOVED", "current_title": null, "prior_title": "Lending commitments3", "prior_body": "61December 2022 Form 10-K 61December 2022 Form 10-K 61December 2022 Form 10-K 61 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.2.FVO also includes the fair value of certain unfunded lending commitments.3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements. In 2022, total loans and lending commitments increased by approximately $23 billion, primarily due to growth in Residential real estate loans and Securities-based loans within the Wealth Management business segment, as well as an increase in Secured lending facilities within the Institutional Securities business segment.See Notes 5, 6, 10 and 15 to the financial statements for further information.Allowance for Credit Losses—Loans and Lending Commitments $ in millionsACL—Loans$654 ACL—Lending commitments444 Total at December 31, 20211,098 Gross charge-offs(31)Recoveries7 Net (charge-offs) recoveries(24)Provision for credit losses280 Other(11)Total at December 31, 2022$1,343 ACL—Loans$839 ACL—Lending commitments504 Provision for Credit Losses by Business SegmentYear EndedDecember 31, 2022$ in millionsISWMTotalLoans$149 $67 $216 Lending commitments62 2 64 Total$211 $69 $280 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered.The aggregate allowance for credit losses for loans and lending commitments increased in 2022, reflecting the Provision for credit losses due to portfolio growth and deterioration in macroeconomic outlook. The base scenario used in our ACL models as of December 31, 2022 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes weak economic growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product. Forecasted U.S. Real GDP Growth Rates in Base Scenario4Q 20234Q 2024Year-over-year growth rate0.4 %1.7 %See Notes 10 to the financial statements for further information. See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL. At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.2.FVO also includes the fair value of certain unfunded lending commitments.3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements. In 2022, total loans and lending commitments increased by approximately $23 billion, primarily due to growth in Residential real estate loans and Securities-based loans within the Wealth Management business segment, as well as an increase in Secured lending facilities within the Institutional Securities business segment.See Notes 5, 6, 10 and 15 to the financial statements for further information. At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695" }, { "status": "REMOVED", "current_title": null, "prior_title": "Status of Loans Held for Investment", "prior_body": "At December 31, 2022At December 31, 2021ISWMISWMAccrual99.3 %99.9 %98.7 %99.8 %Nonaccrual10.7 %0.1 %1.3 %0.2 % Nonaccrual1 1.These loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt. Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2022Net charge-off ratio1(0.09)%0.01 %0.09 %— %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %— %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 2020Net charge-off ratio10.41 %— %0.87 %— %(0.01)%0.07 %Average loans$8,633 $25,281 $7,326 $32,361 $56,018 $129,619 Net charge-off ratio1 Net charge-off ratio1 Net charge-off ratio1 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL." }, { "status": "REMOVED", "current_title": null, "prior_title": "commitments", "prior_body": "At December 31, 2021 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$— $35 $38 $— $73 A890 1,089 675 — 2,654 BBB5,335 8,944 563 — 14,842 BB10,734 18,349 814 18 29,915 Other NIG4,656 10,475 3,439 160 18,730 Unrated2171 665 511 3,753 5,100 Total loans, net of ACL21,786 39,557 6,040 3,931 71,314 Lending commitmentsAAA— 50 — — 50 AA3,283 2,690 — — 5,973 A5,255 17,646 407 303 23,611 BBB6,703 36,096 766 — 43,565 BB2,859 19,698 3,122 — 25,679 Other NIG992 13,420 6,180 55 20,647 Unrated2672 40 3 — 715 Total lendingcommitments19,764 89,640 10,478 358 120,240 Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 NIG–Non-investment grade1.Counterparty credit ratings are internally determined by the CRM.2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.Institutional Securities Loans and Lending Commitments by Industry$ in millionsAtDecember 31,2022AtDecember 31,2021Financials$54,222 $52,066 Real estate32,358 31,560 Communications services15,336 12,645 Industrials14,557 17,446 Information technology13,790 13,471 Healthcare12,353 12,618 Consumer discretionary11,592 11,628 Utilities10,542 10,310 Energy9,115 8,544 Consumer staples7,823 7,855 Materials6,102 6,394 Insurance5,925 4,954 Other1,831 2,063 Total exposure$195,546 $191,554 Institutional Securities Lending ActivitiesThe Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate, and Securities-based lending and Other. As of December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge At December 31, 2021 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$— $35 $38 $— $73 A890 1,089 675 — 2,654 BBB5,335 8,944 563 — 14,842 BB10,734 18,349 814 18 29,915 Other NIG4,656 10,475 3,439 160 18,730 Unrated2171 665 511 3,753 5,100 Total loans, net of ACL21,786 39,557 6,040 3,931 71,314 Lending commitmentsAAA— 50 — — 50 AA3,283 2,690 — — 5,973 A5,255 17,646 407 303 23,611 BBB6,703 36,096 766 — 43,565 BB2,859 19,698 3,122 — 25,679 Other NIG992 13,420 6,180 55 20,647 Unrated2672 40 3 — 715 Total lendingcommitments19,764 89,640 10,478 358 120,240 Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 Unrated2 Unrated2" }, { "status": "REMOVED", "current_title": null, "prior_title": "commitments", "prior_body": "At December 31, 2021 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$— $35 $38 $— $73 A890 1,089 675 — 2,654 BBB5,335 8,944 563 — 14,842 BB10,734 18,349 814 18 29,915 Other NIG4,656 10,475 3,439 160 18,730 Unrated2171 665 511 3,753 5,100 Total loans, net of ACL21,786 39,557 6,040 3,931 71,314 Lending commitmentsAAA— 50 — — 50 AA3,283 2,690 — — 5,973 A5,255 17,646 407 303 23,611 BBB6,703 36,096 766 — 43,565 BB2,859 19,698 3,122 — 25,679 Other NIG992 13,420 6,180 55 20,647 Unrated2672 40 3 — 715 Total lendingcommitments19,764 89,640 10,478 358 120,240 Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 NIG–Non-investment grade1.Counterparty credit ratings are internally determined by the CRM.2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.Institutional Securities Loans and Lending Commitments by Industry$ in millionsAtDecember 31,2022AtDecember 31,2021Financials$54,222 $52,066 Real estate32,358 31,560 Communications services15,336 12,645 Industrials14,557 17,446 Information technology13,790 13,471 Healthcare12,353 12,618 Consumer discretionary11,592 11,628 Utilities10,542 10,310 Energy9,115 8,544 Consumer staples7,823 7,855 Materials6,102 6,394 Insurance5,925 4,954 Other1,831 2,063 Total exposure$195,546 $191,554 Institutional Securities Lending ActivitiesThe Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate, and Securities-based lending and Other. As of December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge At December 31, 2021 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$— $35 $38 $— $73 A890 1,089 675 — 2,654 BBB5,335 8,944 563 — 14,842 BB10,734 18,349 814 18 29,915 Other NIG4,656 10,475 3,439 160 18,730 Unrated2171 665 511 3,753 5,100 Total loans, net of ACL21,786 39,557 6,040 3,931 71,314 Lending commitmentsAAA— 50 — — 50 AA3,283 2,690 — — 5,973 A5,255 17,646 407 303 23,611 BBB6,703 36,096 766 — 43,565 BB2,859 19,698 3,122 — 25,679 Other NIG992 13,420 6,180 55 20,647 Unrated2672 40 3 — 715 Total lendingcommitments19,764 89,640 10,478 358 120,240 Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 Unrated2 Unrated2" }, { "status": "REMOVED", "current_title": null, "prior_title": "Institutional Securities Loans and Lending Commitments by Industry", "prior_body": "$ in millionsAtDecember 31,2022AtDecember 31,2021Financials$54,222 $52,066 Real estate32,358 31,560 Communications services15,336 12,645 Industrials14,557 17,446 Information technology13,790 13,471 Healthcare12,353 12,618 Consumer discretionary11,592 11,628 Utilities10,542 10,310 Energy9,115 8,544 Consumer staples7,823 7,855 Materials6,102 6,394 Insurance5,925 4,954 Other1,831 2,063 Total exposure$195,546 $191,554" }, { "status": "REMOVED", "current_title": null, "prior_title": "At December 31, 20221", "prior_body": "At December 31, 2021 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$951 $2,088 $1,803 $4,842 Lending commitments1,619 5,288 8,879 15,786 Total exposure$2,570 $7,376 $10,682 $20,628 1.In the fourth quarter of the current year, approximately $0.5 billion of loans and $4.0 billion of lending commitments in a portfolio substantially consisting of revolving credit facilities across multiple corporate relationships were reclassified within Corporate Lending from Event Lending to Relationship Lending. Event-driven loans and lending commitments are associated with an underwriting and/or syndication to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.Institutional Securities Loans and Lending Commitments Held for InvestmentAt December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158)At December 31, 2021$ in millionsLoansLending CommitmentsTotalCorporate$5,567 $73,585 $79,152 Secured lending facilities31,471 10,003 41,474 Commercial real estate7,227 1,475 8,702 Other1,292 887 2,179 Total, before ACL$45,557 $85,950 $131,507 ACL$(543)$(426)$(969)Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments$ in millionsCorporate Secured Lending FacilitiesCommercial Real EstateOtherTotalACL—Loans$165 $163 $206 $9 $543 ACL—Lending commitments356 41 20 9 426 Total at December 31, 2021521 204 226 18 969 Gross charge-offs— (3)(7)(7)(17)Recoveries6 — — — 6 Net (charge-offs) recoveries6 (3)(7)(7)(11)Provision for credit losses124 4 75 8 211 Other(5)(1)(4)(1)(11)Total at December 31, 2022$646 $204 $290 $18 $1,158 ACL—Loans$235 $153 $275 $11 $674 ACL—Lending commitments411 51 15 7 484 Institutional Securities Loans Held for Investment—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2022 AtDecember 31,2021 Corporate3.6 %3.0 %Secured lending facilities0.4 %0.5 %Commercial real estate3.2 %2.9 %Other0.4 %0.7 %Total Institutional Securities loans1.3 %1.2 % lending is related to transactions that vary in timing and size from period to period." }, { "status": "REMOVED", "current_title": null, "prior_title": "Wealth Management Allowance for Credit Losses—Loans and Lending Commitments", "prior_body": "$ in millionsACL—Loans$111 ACL—Lending commitments18 Total at December 31, 2021129 Gross charge-offs(14)Recoveries1 Net (charge-offs) recoveries(13)Provision for credit losses69 Total at December 31, 2022$185 ACL—Loans$165 ACL—Lending commitments20 Total at December 31, 2021" }, { "status": "REMOVED", "current_title": null, "prior_title": "Total at December 31, 2022", "prior_body": "Institutional Securities Loans Held for Investment—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2022 AtDecember 31,2021 Corporate3.6 %3.0 %Secured lending facilities0.4 %0.5 %Commercial real estate3.2 %2.9 %Other0.4 %0.7 %Total Institutional Securities loans1.3 %1.2 % December 2022 Form 10-K64 December 2022 Form 10-K64 December 2022 Form 10-K64 64 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Wealth Management Loans and Lending Commitments At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estateloans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 At December 31, 20211 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 Residential real estate loans4 10 1,231 42,954 44,199 Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 Lending commitments11,894 2,467 51 282 14,694 Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Allowance for Credit Losses—Loans and Lending Commitments$ in millionsACL—Loans$111 ACL—Lending commitments18 Total at December 31, 2021129 Gross charge-offs(14)Recoveries1 Net (charge-offs) recoveries(13)Provision for credit losses69 Total at December 31, 2022$185 ACL—Loans$165 ACL—Lending commitments20 At December 31, 2022, more than 75% of Wealth Management residential real estate loans were to borrowers with “Exceptional” or “Very Good” FICO scores (i.e., exceeding 740). Additionally, Wealth Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary.Customer and Other ReceivablesMargin and Other Lending$ in millionsAtDecember 31,2022AtDecember 31,2021 Institutional Securities$16,591 $40,545 Wealth Management21,933 30,987 Total$38,524 $71,532 The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” herein. Employee LoansFor information on employee loans and related ACL, see Note 10 to the financial statements. Wealth Management Loans and Lending Commitments At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estateloans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 At December 31, 20211 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 Residential real estate loans4 10 1,231 42,954 44,199 Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 Lending commitments11,894 2,467 51 282 14,694 Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio." }, { "status": "REMOVED", "current_title": null, "prior_title": "Margin and Other Lending", "prior_body": "$ in millionsAtDecember 31,2022AtDecember 31,2021 Institutional Securities$16,591 $40,545 Wealth Management21,933 30,987 Total$38,524 $71,532 The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage. Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” herein." }, { "status": "REMOVED", "current_title": null, "prior_title": "Employee Loans", "prior_body": "For information on employee loans and related ACL, see Note 10 to the financial statements. 65December 2022 Form 10-K 65December 2022 Form 10-K 65December 2022 Form 10-K 65 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents DerivativesFair Value of OTC Derivative Assets Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2022Less than 1 year$2,903 $18,166 $40,825 $32,373 $10,730 $104,997 1-3 years1,818 8,648 17,113 19,365 6,974 53,918 3-5 years655 6,834 8,632 9,105 4,049 29,275 Over 5 years4,206 42,613 45,488 46,660 8,244 147,211 Total, gross$9,582 $76,261 $112,058 $107,503 $29,997 $335,401 Counterparty netting(4,037)(60,451)(79,334)(85,786)(17,415)(247,023)Cash and securities collateral(3,632)(13,402)(28,776)(14,457)(5,198)(65,465)Total, net$1,913 $2,408 $3,948 $7,260 $7,384 $22,913 Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2021Less than 1 year$1,561 $11,088 $32,069 $25,680 $11,924 $82,322 1-3 years780 4,577 16,821 15,294 6,300 43,772 3-5 years593 4,807 6,805 8,030 3,317 23,552 Over 5 years4,359 26,056 61,091 44,091 4,633 140,230 Total, gross$7,293 $46,528 $116,786 $93,095 $26,174 $289,876 Counterparty netting(3,093)(36,957)(91,490)(68,365)(11,642)(211,547)Cash and securities collateral(3,539)(7,608)(20,500)(17,755)(5,762)(55,164)Total, net$661 $1,963 $4,796 $6,975 $8,770 $23,165 $ in millionsAtDecember 31,2022AtDecember 31,2021IndustryFinancials$6,294 $5,096 Utilities5,656 5,918 Energy2,851 2,587 Regional governments2,052 963 Industrials1,433 985 Communications services1,051 348 Consumer staples687 324 Healthcare565 682 Information technology480 1,060 Sovereign governments410 386 Materials317 240 Consumer Discretionary290 3,069 Not-for-profit organizations204 531 Insurance185 174 Real estate95 280 Other343 522 Total$22,913 $23,165 1.Counterparty credit ratings are determined internally by the CRM.We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For a description of our risk mitigation strategies, see “Credit Risk—Risk Mitigation” herein.Credit DerivativesA credit derivative is a contract between a seller and buyer of protection against the risk of a credit event occurring on one or more debt obligations issued by a specified reference entity. The buyer typically pays a periodic premium over the life of the contract and is protected for the period. If a credit event occurs, the seller is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events, as defined in the contract, may be one or more of the following defined events: bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation, payment moratorium and restructuring.We trade in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. In transactions referencing a portfolio of entities or securities, protection may be limited to a tranche of exposure or a single name within the portfolio. We are an active market maker in the credit derivatives markets. As a market maker, we work to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, we use credit derivatives to manage our exposure to residential and commercial mortgage loans and corporate lending exposures. The effectiveness of our CDS protection as a hedge of our exposures may vary depending upon a number of factors, including the contractual terms of the CDS.We actively monitor our counterparty credit risk related to credit derivatives. A majority of our counterparties are composed of banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties may include provisions related to counterparty rating downgrades, which may result in the counterparty posting additional collateral to us. As with all derivative contracts, we consider counterparty credit risk in the valuation of our positions and recognize CVAs as appropriate within Trading revenues in the income statement.For additional credit exposure information on our credit derivative portfolio, see Note 7 to the financial statements. DerivativesFair Value of OTC Derivative Assets Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2022Less than 1 year$2,903 $18,166 $40,825 $32,373 $10,730 $104,997 1-3 years1,818 8,648 17,113 19,365 6,974 53,918 3-5 years655 6,834 8,632 9,105 4,049 29,275 Over 5 years4,206 42,613 45,488 46,660 8,244 147,211 Total, gross$9,582 $76,261 $112,058 $107,503 $29,997 $335,401 Counterparty netting(4,037)(60,451)(79,334)(85,786)(17,415)(247,023)Cash and securities collateral(3,632)(13,402)(28,776)(14,457)(5,198)(65,465)Total, net$1,913 $2,408 $3,948 $7,260 $7,384 $22,913 Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2021Less than 1 year$1,561 $11,088 $32,069 $25,680 $11,924 $82,322 1-3 years780 4,577 16,821 15,294 6,300 43,772 3-5 years593 4,807 6,805 8,030 3,317 23,552 Over 5 years4,359 26,056 61,091 44,091 4,633 140,230 Total, gross$7,293 $46,528 $116,786 $93,095 $26,174 $289,876 Counterparty netting(3,093)(36,957)(91,490)(68,365)(11,642)(211,547)Cash and securities collateral(3,539)(7,608)(20,500)(17,755)(5,762)(55,164)Total, net$661 $1,963 $4,796 $6,975 $8,770 $23,165 $ in millionsAtDecember 31,2022AtDecember 31,2021IndustryFinancials$6,294 $5,096 Utilities5,656 5,918 Energy2,851 2,587 Regional governments2,052 963 Industrials1,433 985 Communications services1,051 348 Consumer staples687 324 Healthcare565 682 Information technology480 1,060 Sovereign governments410 386 Materials317 240 Consumer Discretionary290 3,069 Not-for-profit organizations204 531 Insurance185 174 Real estate95 280 Other343 522 Total$22,913 $23,165 1.Counterparty credit ratings are determined internally by the CRM.We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For a description of our risk mitigation strategies, see “Credit Risk—Risk Mitigation” herein.Credit DerivativesA credit derivative is a contract between a seller and buyer of protection against the risk of a credit event occurring on one" }, { "status": "REMOVED", "current_title": null, "prior_title": "Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2022Less than 1 year$2,903 $18,166 $40,825 $32,373 $10,730 $104,997 1-3 years1,818 8,648 17,113 19,365 6,974 53,918 3-5 years655 6,834 8,632 9,105 4,049 29,275 Over 5 years4,206 42,613 45,488 46,660 8,244 147,211 Total, gross$9,582 $76,261 $112,058 $107,503 $29,997 $335,401 Counterparty netting(4,037)(60,451)(79,334)(85,786)(17,415)(247,023)Cash and securities collateral(3,632)(13,402)(28,776)(14,457)(5,198)(65,465)Total, net$1,913 $2,408 $3,948 $7,260 $7,384 $22,913", "prior_body": "Counterparty Credit Rating1 Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2021Less than 1 year$1,561 $11,088 $32,069 $25,680 $11,924 $82,322 1-3 years780 4,577 16,821 15,294 6,300 43,772 3-5 years593 4,807 6,805 8,030 3,317 23,552 Over 5 years4,359 26,056 61,091 44,091 4,633 140,230 Total, gross$7,293 $46,528 $116,786 $93,095 $26,174 $289,876 Counterparty netting(3,093)(36,957)(91,490)(68,365)(11,642)(211,547)Cash and securities collateral(3,539)(7,608)(20,500)(17,755)(5,762)(55,164)Total, net$661 $1,963 $4,796 $6,975 $8,770 $23,165 Counterparty Credit Rating1 $ in millionsAtDecember 31,2022AtDecember 31,2021IndustryFinancials$6,294 $5,096 Utilities5,656 5,918 Energy2,851 2,587 Regional governments2,052 963 Industrials1,433 985 Communications services1,051 348 Consumer staples687 324 Healthcare565 682 Information technology480 1,060 Sovereign governments410 386 Materials317 240 Consumer Discretionary290 3,069 Not-for-profit organizations204 531 Insurance185 174 Real estate95 280 Other343 522 Total$22,913 $23,165 1.Counterparty credit ratings are determined internally by the CRM. We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For a description of our risk mitigation strategies, see “Credit Risk—Risk Mitigation” herein." }, { "status": "REMOVED", "current_title": null, "prior_title": "Credit Derivatives", "prior_body": "A credit derivative is a contract between a seller and buyer of protection against the risk of a credit event occurring on one or more debt obligations issued by a specified reference entity. The buyer typically pays a periodic premium over the life of the contract and is protected for the period. If a credit event occurs, the seller is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events, as defined in the contract, may be one or more of the following defined events: bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation, payment moratorium and restructuring.We trade in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. In transactions referencing a portfolio of entities or securities, protection may be limited to a tranche of exposure or a single name within the portfolio. We are an active market maker in the credit derivatives markets. As a market maker, we work to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, we use credit derivatives to manage our exposure to residential and commercial mortgage loans and corporate lending exposures. The effectiveness of our CDS protection as a hedge of our exposures may vary depending upon a number of factors, including the contractual terms of the CDS.We actively monitor our counterparty credit risk related to credit derivatives. A majority of our counterparties are composed of banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties may include provisions related to counterparty rating downgrades, which may result in the counterparty posting additional collateral to us. As with all derivative contracts, we consider counterparty credit risk in the valuation of our positions and recognize CVAs as appropriate within Trading revenues in the income statement.For additional credit exposure information on our credit derivative portfolio, see Note 7 to the financial statements. or more debt obligations issued by a specified reference entity. The buyer typically pays a periodic premium over the life of the contract and is protected for the period. If a credit event occurs, the seller is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events, as defined in the contract, may be one or more of the following defined events: bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation, payment moratorium and restructuring. We trade in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. In transactions referencing a portfolio of entities or securities, protection may be limited to a tranche of exposure or a single name within the portfolio. We are an active market maker in the credit derivatives markets. As a market maker, we work to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, we use credit derivatives to manage our exposure to residential and commercial mortgage loans and corporate lending exposures. The effectiveness of our CDS protection as a hedge of our exposures may vary depending upon a number of factors, including the contractual terms of the CDS. We actively monitor our counterparty credit risk related to credit derivatives. A majority of our counterparties are composed of banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties may include provisions related to counterparty rating downgrades, which may result in the counterparty posting additional collateral to us. As with all derivative contracts, we consider counterparty credit risk in the valuation of our positions and recognize CVAs as appropriate within Trading revenues in the income statement. For additional credit exposure information on our credit derivative portfolio, see Note 7 to the financial statements." }, { "status": "MODIFIED", "current_title": "Workplace Channel1", "prior_title": "Workplace Channel1", "similarity_score": 0.92, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31,2023At December 31,2022Workplace unvested assets (in billions)2$416$302Number of participants (in millions)36.66.3 Workplace unvested assets (in billions)2 Number of participants (in millions)3 1.The workplace channel includes equity compensation solutions for companies, their executives and employees.\"", "Reworded sentence: \"The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 29%, 34% and 24% for 2023, 2022 and 2021, respectively.\"" ], "current_body": "At December 31,2023At December 31,2022Workplace unvested assets (in billions)2$416$302Number of participants (in millions)36.66.3 Workplace unvested assets (in billions)2 Number of participants (in millions)3 1.The workplace channel includes equity compensation solutions for companies, their executives and employees. 2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 29%, 34% and 24% for 2023, 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows. 3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.", "prior_body": "$ in billionsAt December 31,2022At December 31,2021Workplace unvested assets2$302$509Number of participants (in millions)36.35.6 Workplace unvested assets2 Number of participants (in millions)3 1.The workplace channel includes equity compensation solutions for companies, their executives and employees. 2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 34% and 24% for 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows. 3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan." }, { "status": "MODIFIED", "current_title": "Regulatory Capital Framework", "prior_title": "Regulatory Capital Framework", "similarity_score": 0.92, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are an FHC under the BHC Act and are subject to the regulation and oversight of the Federal Reserve.\"", "Added sentence: \"Bank 53December 2023 Form 10-K 53December 2023 Form 10-K 53December 2023 Form 10-K 53 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Subsidiaries.\"", "Reworded sentence: \"In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants.\"", "Reworded sentence: \"Bank Subsidiaries, as well as our subsidiaries that are swap entities, see Note 16 to the financial statements.Regulatory Capital RequirementsWe are required to maintain minimum risk-based and leverage-based capital and TLAC ratios.\"", "Reworded sentence: \"Capital Buffer RequirementsAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.4%5.8%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.4%8.8%5.5%1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers.\"" ], "current_body": "We are an FHC under the BHC Act and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank 53December 2023 Form 10-K 53December 2023 Form 10-K 53December 2023 Form 10-K 53 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are swap entities, see Note 16 to the financial statements.Regulatory Capital RequirementsWe are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.4%5.8%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.4%8.8%5.5%1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. Risk-Based Regulatory Capital Ratio RequirementsRegulatory MinimumAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %12.9%13.3%10.0%Tier 1 capital ratio6.0 %14.4%14.8%11.5%Total capital ratio8.0 %16.4%16.8%13.5%1.Required ratios represent the regulatory minimum plus the capital buffer requirement.Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:•Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;•Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and•Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2023 and December 31, 2022, the differences between the actual and required ratios were lower under the Standardized Approach.Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.CECL Deferral. Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 50% from January 1, 2023. The deferral impacts will become fully phased-in beginning on January 1, 2025. Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are swap entities, see Note 16 to the financial statements.Regulatory Capital RequirementsWe are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.4%5.8%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.4%8.8%5.5%1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are swap entities, see Note 16 to the financial statements.", "prior_body": "We are an FHC under the Bank Holding Company Act of 1956, as amended (“BHC Act”) and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are Swap Entities, see Note 17 to the financial statements.Regulatory Capital RequirementsWe are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.8%5.7%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.8%8.7%5.5%1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are Swap Entities, see Note 17 to the financial statements." }, { "status": "MODIFIED", "current_title": "Income Taxes", "prior_title": "Income Taxes", "similarity_score": 0.917, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have business operations.\"", "Reworded sentence: \"We must make judgments and interpretations about the application of these inherently complex tax laws and make estimates about certain items affecting taxable income when determining the provision for income taxes in the various tax jurisdictions.\"", "Reworded sentence: \"Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.\"", "Reworded sentence: \"Revisions in estimates and/or the actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.See Note 2 to the financial statements for additional information on our significant assumptions, judgments and interpretations associated with the accounting for income taxes and Note 21 to the financial statements for additional information on our tax examinations.Liquidity and Capital ResourcesOur liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and the Board.\"", "Reworded sentence: \"Our Corporate Treasury department (“Treasury”), Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure.\"" ], "current_body": "The Income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment. Certain items have been allocated to each business segment, generally in proportion to its respective net revenues or other relevant measures. December 2023 Form 10-K36 December 2023 Form 10-K36 December 2023 Form 10-K36 36 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Institutional SecuritiesIncome Statement Information % Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%Investment BankingInvestment Banking Volumes$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.2.Based on full credit for single book managers and equal credit for joint book managers.3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates.See “Investment Banking Volumes” herein.Equity, Fixed Income and Other Net RevenuesEquity and Fixed Income Net Revenues 2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 1.Includes Commissions and fees and Asset management revenues.2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues.EquityNet revenues of $9,986 million in 2023 decreased 7% compared with the prior year, reflecting decreases in Financing and Execution services.•Financing revenues decreased primarily due to higher funding and liquidity costs compared with the prior year.•Execution services revenues decreased primarily due to lower gains on inventory held to facilitate client activity in derivatives and cash equities and lower client activity in cash equities, partially offset by mark-to-market gains on business-related investments compared with losses in the prior year.Fixed IncomeNet revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products.•Global macro products revenues decreased primarily due to a decline in foreign exchange products.•Credit products revenues decreased primarily due to lower client activity across products. Institutional SecuritiesIncome Statement Information % Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%Investment BankingInvestment Banking Volumes$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.2.Based on full credit for single book managers and equal credit for joint book managers.3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.", "prior_body": "The Firm's effective tax rate of 20.7% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $24,393 million in 2022 decreased 18% from the prior year, primarily reflecting lower results from Investment banking, particularly equity underwriting, and losses in Other net revenues primarily from higher mark-to-market losses on corporate loans held for sale inclusive of hedges, partially offset by higher Fixed income results, particularly in global macro products.•Wealth Management net revenues of $24,417 million in 2022 increased 1% from the prior year, as higher Net interest revenues were offset by lower Transactional revenues, primarily driven by losses on investments associated with certain employee deferred cash-based compensation plans." }, { "status": "MODIFIED", "current_title": "commitments", "prior_title": "Institutional Securities Loans and Lending Commitments1", "similarity_score": 0.915, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 Unrated2 Unrated2\"" ], "current_body": "At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 Unrated2 Unrated2", "prior_body": "At December 31, 2022 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 Unrated2 Unrated2" }, { "status": "MODIFIED", "current_title": "Investment Banking Volumes", "prior_title": "Investment Banking Volumes", "similarity_score": 0.915, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Completed mergers and acquisitions1 Equity and equity-related offerings2, 3 Fixed income offerings2, 4 Source: Refinitiv data as of January 2, 2024.\"" ], "current_body": "$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Completed mergers and acquisitions1 Equity and equity-related offerings2, 3 Fixed income offerings2, 4 Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions. 1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction. 2.Based on full credit for single book managers and equal credit for joint book managers. 3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings. 4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.", "prior_body": "$ in billions202220212020Completed mergers and acquisitions1$897 $1,107 $887 Equity and equity-related offerings2, 323 117 100 Fixed income offerings2, 4228 371 377 Completed mergers and acquisitions1 Equity and equity-related offerings2, 3 Fixed income offerings2, 4 Source: Refinitiv data as of January 3, 2023. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions. 1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction. 2.Based on full credit for single book managers and equal credit for joint book managers. 3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings. 4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances." }, { "status": "MODIFIED", "current_title": "Capital Plans, Stress Tests and the Stress Capital Buffer", "prior_title": "Capital Plans, Stress Tests and the Stress Capital Buffer", "similarity_score": 0.914, "confidence": "high", "key_changes": [ "Reworded sentence: \"The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated capital.\"", "Reworded sentence: \"The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter.For the 2023 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2023.\"", "Reworded sentence: \"For the 2023 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2023.\"", "Reworded sentence: \"We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent Company common equity.\"", "Removed sentence: \"2.The total average common equity and the allocation to the Wealth Management business segment in 2022 and 2021 reflect the E*TRADE acquisition on October 2, 2020.3.\"" ], "current_body": "The Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework. We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements. The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us.As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period.A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter.For the 2023 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2023. On June 28, 2023, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test by 50 basis points, from 4.6% to 4.1%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.4% from October 1, 2023 through September 30, 2024. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 12.9%. We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.85 per share from $0.775, beginning with the common stock dividend announced on July 18, 2023. Additionally, our Board of Directors reauthorized a multi-year common stock repurchase program of up to $20 billion, without a set capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us. As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period. A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter. For the 2023 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2023. On June 28, 2023, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test by 50 basis points, from 4.6% to 4.1%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.4% from October 1, 2023 through September 30, 2024. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 12.9%. We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.85 per share from $0.775, beginning with the common stock dividend announced on July 18, 2023. Additionally, our Board of Directors reauthorized a multi-year common stock repurchase program of up to $20 billion, without a set 57December 2023 Form 10-K 57December 2023 Form 10-K 57December 2023 Form 10-K 57 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents expiration date, beginning in the third quarter of 2023, which will be exercised from time to time as conditions warrant.Attribution of Average Common Equity According to the Required Capital Framework Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital. The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent Company common equity. We generally hold Parent Company common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.Average Common Equity Attribution under the Required Capital Framework1 $ in billions202320222021Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management210.4 10.6 8.8 Parent6.0 3.5 16.2 Total$90.8 $93.9 $97.1 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate. Resolution and Recovery PlanningWe are required to submit once every two years to the Federal Reserve and the FDIC (“Agencies”) a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Agencies. The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior shortcoming identified by the Agencies in the review of our 2019 full resolution plan. We submitted our 2023 full resolution plan on June 30, 2023. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.”As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company.For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”Regulatory Developments and Other MattersReplacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate BenchmarksCentral banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). With the cessation of publication of U.S. dollar LIBOR rates on a representative basis as of June 30, 2023, all LIBOR publications have ceased on a representative basis. However, the one-, three- and six-month U.S. dollar LIBOR and three-month sterling LIBOR rates are being published for a limited period for use in legacy transactions on the basis of a expiration date, beginning in the third quarter of 2023, which will be exercised from time to time as conditions warrant.Attribution of Average Common Equity According to the Required Capital Framework Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital. The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent Company common equity. We generally hold Parent Company common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.Average Common Equity Attribution under the Required Capital Framework1 $ in billions202320222021Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management210.4 10.6 8.8 Parent6.0 3.5 16.2 Total$90.8 $93.9 $97.1 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate. Resolution and Recovery PlanningWe are required to submit once every two years to the Federal Reserve and the FDIC (“Agencies”) a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Agencies. The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior shortcoming identified by the Agencies in the review of our 2019 full resolution plan. We submitted our 2023 full resolution plan expiration date, beginning in the third quarter of 2023, which will be exercised from time to time as conditions warrant.", "prior_body": "The Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework. We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements. The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated 49December 2022 Form 10-K 49December 2022 Form 10-K 49December 2022 Form 10-K 49 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us.As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period.A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter.For the 2022 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2022. On June 23, 2022, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test, from 4.7% to 4.6%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.8% from October 1, 2022 through September 30, 2023. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 13.3%.We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.775 per share from $0.70, beginning with the common stock dividend announced on July 14, 2022. Additionally, our Board of Directors approved a new multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, which will be exercised from time to time as conditions warrant.Attribution of Average Common Equity According to the Required Capital Framework Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital. The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent common equity. We generally hold Parent common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.Average Common Equity Attribution under the Required Capital Framework1 $ in billions202220212020Institutional Securities$48.8 $43.5 $42.8 Wealth Management231.0 28.6 20.8 Investment Management310.6 8.8 2.6 Parent3.5 16.2 14.0 Total$93.9 $97.1 $80.2 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2.The total average common equity and the allocation to the Wealth Management business segment in 2022 and 2021 reflect the E*TRADE acquisition on October 2, 2020.3. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate. Resolution and Recovery PlanningWe are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Federal Reserve and the FDIC (“Agencies”). The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us.As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period.A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter.For the 2022 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2022. On June 23, 2022, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test, from 4.7% to 4.6%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.8% from October 1, 2022 through September 30, 2023. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 13.3%.We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.775 per share from $0.70, beginning with the common stock dividend announced on July 14, 2022. Additionally, our Board of Directors approved a new multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us. As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period. A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter. For the 2022 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2022. On June 23, 2022, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test, from 4.7% to 4.6%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.8% from October 1, 2022 through September 30, 2023. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 13.3%. We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.775 per share from $0.70, beginning with the common stock dividend announced on July 14, 2022. Additionally, our Board of Directors approved a new multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, which will be exercised from time to time as conditions warrant.Attribution of Average Common Equity According to the Required Capital Framework Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital. The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent common equity. We generally hold Parent common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.Average Common Equity Attribution under the Required Capital Framework1 $ in billions202220212020Institutional Securities$48.8 $43.5 $42.8 Wealth Management231.0 28.6 20.8 Investment Management310.6 8.8 2.6 Parent3.5 16.2 14.0 Total$93.9 $97.1 $80.2 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2.The total average common equity and the allocation to the Wealth Management business segment in 2022 and 2021 reflect the E*TRADE acquisition on October 2, 2020.3. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate. Resolution and Recovery PlanningWe are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Federal Reserve and the FDIC (“Agencies”). The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior which will be exercised from time to time as conditions warrant." }, { "status": "MODIFIED", "current_title": "We are a holding company and depend on payments from our subsidiaries.", "prior_title": "We are a holding company and depend on payments from our subsidiaries.", "similarity_score": 0.913, "confidence": "high", "key_changes": [ "Reworded sentence: \"The Parent Company has no business operations and depends on dividends, distributions, loans and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations.\"", "Reworded sentence: \"In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S.\"", "Reworded sentence: \"The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends or other capital actions by the banking organizations they supervise, including us and our U.S.\"", "Added sentence: \"Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S.\"", "Added sentence: \"and international markets and economic conditions.Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S.\"" ], "current_body": "The Parent Company has no business operations and depends on dividends, distributions, loans and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities. These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends or other capital actions by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein. Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies.In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets, interest rates and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.Legal, Regulatory and Compliance RiskLegal, regulatory and compliance risk includes the risk of legal or regulatory sanctions; material financial loss, including fines, penalties, judgments, damages and/or settlements; limitations on our business; or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing and anti-corruption rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal, Regulatory and Compliance Risk.”The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions and disclosure regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments.The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards,", "prior_body": "The Parent Company has no operations and depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such 13December 2022 Form 10-K 13December 2022 Form 10-K 13December 2022 Form 10-K 13 Table of Contents Table of Contents Table of Contents transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities.These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein.Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies.In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets, interest rates, and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.Legal, Regulatory and Compliance RiskLegal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, anti-corruption and terrorist financing rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal and Compliance Risk.”The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments.The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on new activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, commodities regulation, market structure regulation, consumer protection regulation, tax regulations, antitrust laws, trade and transaction reporting obligations, and broadened fiduciary obligations.Ongoing implementation of, our efforts to comply with, and/or changes to laws and regulations, including changes in the breadth, application, interpretation or enforcement of laws and regulations, could materially impact the profitability of our businesses and the value of assets we hold, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors.In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us. Legal and regulatory requirements continue to be subject to ongoing interpretation and change, which may result in significant new costs to comply with new or revised requirements, as well as to monitor for compliance on an ongoing basis.The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities.These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein.Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies.In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets, interest rates, and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.Legal, Regulatory and Compliance RiskLegal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, anti-corruption and terrorist financing rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal and Compliance Risk.”The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities. These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein." }, { "status": "MODIFIED", "current_title": "A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.", "prior_title": "A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.", "similarity_score": 0.912, "confidence": "high", "key_changes": [ "Reworded sentence: \"Indeed, actions that merely appear to create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated.\"", "Reworded sentence: \"Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.As our businesses change and grow, including through acquisitions and the introduction and application of new technologies, such as artificial intelligence, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes.\"", "Reworded sentence: \"As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses.\"" ], "current_body": "As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information. We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.Risk ManagementOur risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.As our businesses change and grow, including through acquisitions and the introduction and application of new technologies, such as artificial intelligence, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses. Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot occur and could adversely affect our businesses and reputation. Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.", "prior_body": "As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information. We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to December 2022 Form 10-K16 December 2022 Form 10-K16 December 2022 Form 10-K16 16 Table of Contents Table of Contents Table of Contents create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.Risk ManagementOur risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.As our businesses change and grow, including through acquisitions, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses.Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, wildfires, and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels, and droughts. Such events could disrupt our operations or those of our clients or third-parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. Over the longer term, these events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, limit insurance coverage and result in other effects.Additionally, transitioning to a low-carbon economy will likely require extensive policy, legal, technology and market changes. Transition risks, including changes in consumer and business sentiment, related technologies, shareholder preferences, and any additional regulatory and legislative requirements, including carbon taxes, could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Over the longer term, negative impacts to certain of our clients, such as decreased profitability and stranded assets, could also lead to increased credit and counterparty risk to us.In addition, our reputation and client relationships may be adversely impacted as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries, projects, or initiatives associated with causing, or potentially slowing solutions to, climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. Legislative or create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.Risk ManagementOur risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.As our businesses change and grow, including through acquisitions, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses.Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation. Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients." }, { "status": "MODIFIED", "current_title": "Introduction", "prior_title": "Introduction", "similarity_score": 0.906, "confidence": "high", "key_changes": [ "Removed sentence: \"Disclosures reflect the effects of the acquisitions of Eaton Vance Corp.\"", "Removed sentence: \"(“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively.\"", "Reworded sentence: \"For an analysis of 2022 results compared with 2021 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2022 filed with the SEC.A description of the clients and principal products and services of each of our business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients.\"", "Removed sentence: \"Disclosures reflect the effects of the acquisitions of Eaton Vance Corp.\"", "Removed sentence: \"(“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively.\"" ], "current_body": "Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2022 results compared with 2021 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2022 filed with the SEC.A description of the clients and principal products and services of each of our business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2022 results compared with 2021 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2022 filed with the SEC.A description of the clients and principal products and services of each of our business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services. Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2022 results compared with 2021 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2022 filed with the SEC. A description of the clients and principal products and services of each of our business segments is as follows: Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research. Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services. Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors. Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies. The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. December 2023 Form 10-K28 December 2023 Form 10-K28 December 2023 Form 10-K28 28 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Executive SummaryOverview of Financial ResultsConsolidated Results—Full Year Ended December 31, 2023•The Firm reported net revenues of $54.1 billion and net income of $9.1 billion against a mixed market backdrop and a number of headwinds.•The Firm delivered ROE of 9.4% and ROTCE of 12.8% (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 77%. The ratio was negatively impacted by severance costs of $353 million, an FDIC special assessment of $286 million, higher legal expenses relating to a specific matter of $249 million and integration-related expenses of $293 million.•At December 31, 2023, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.2%.•Institutional Securities reported net revenues of $23.1 billion reflecting lower completed activity in Investment Banking and lower results in Equity and Fixed Income on reduced client activity and a less favorable market environment compared to a year ago.•Wealth Management delivered net revenues of $26.3 billion, reflecting mark-to-market gains on investments associated with certain employee deferred cash-based compensation plans (“DCP investments”) compared with losses in the prior year and higher Net interest revenues. The pre-tax margin was 24.9%. The business added net new assets of $282.3 billion, representing a 6.7% annualized growth rate from beginning period assets. •Investment Management reported net revenues of $5.4 billion and AUM increased to $1.5 trillion.Net Revenues($ in millions)Net Income Applicable to Morgan Stanley($ in millions)Earnings per Diluted Common Share2023 Compared with 2022 •We reported net revenues of $54.1 billion in 2023 compared with $53.7 billion in 2022. For 2023, net income applicable to Morgan Stanley was $9.1 billion, or $5.18 per diluted common share, compared with $11.0 billion, or $6.15 per diluted common share in 2022. Executive SummaryOverview of Financial ResultsConsolidated Results—Full Year Ended December 31, 2023•The Firm reported net revenues of $54.1 billion and net income of $9.1 billion against a mixed market backdrop and a number of headwinds.•The Firm delivered ROE of 9.4% and ROTCE of 12.8% (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 77%. The ratio was negatively impacted by severance costs of $353 million, an FDIC special assessment of $286 million, higher legal expenses relating to a specific matter of $249 million and integration-related expenses of $293 million.•At December 31, 2023, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.2%.•Institutional Securities reported net revenues of $23.1 billion reflecting lower completed activity in Investment Banking and lower results in Equity and Fixed Income on reduced client activity and a less favorable market environment compared to a year ago.•Wealth Management delivered net revenues of $26.3 billion, reflecting mark-to-market gains on investments associated with certain employee deferred cash-based compensation plans (“DCP investments”) compared with losses in the prior year and higher Net interest revenues. The pre-tax margin was 24.9%. The business added net new assets of $282.3 billion, representing a 6.7% annualized growth rate from beginning period assets. •Investment Management reported net revenues of $5.4 billion and AUM increased to $1.5 trillion.", "prior_body": "Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. Disclosures reflect the effects of the acquisitions of Eaton Vance Corp. (“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2021 results compared with 2020 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2021 filed with the SEC.A description of the clients and principal products and services of each of our business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. Disclosures reflect the effects of the acquisitions of Eaton Vance Corp. (“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2021 results compared with 2020 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2021 filed with the SEC.A description of the clients and principal products and services of each of our business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services. Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. Disclosures reflect the effects of the acquisitions of Eaton Vance Corp. (“Eaton Vance”) and E*TRADE Financial Corporation (“E*TRADE”) prospectively from the acquisition dates, March 1, 2021 and October 2, 2020, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2021 results compared with 2020 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year-ended December 31, 2021 filed with the SEC. A description of the clients and principal products and services of each of our business segments is as follows: Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research. Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services. Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors. Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies. The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein. 21December 2022 Form 10-K 21December 2022 Form 10-K 21December 2022 Form 10-K 21 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Executive SummaryOverview of Financial ResultsConsolidated Results—Full Year ended December 31, 2022•The Firm reported net revenues of $53.7 billion and net income of $11.0 billion as our businesses navigated a challenging market environment.•The Firm delivered ROTCE of 15.3%, or 15.7% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 73%, or 72% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein).•At December 31, 2022, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.3%.•Institutional Securities reported net revenues of $24.4 billion reflecting lower activity in Investment Banking driven by the uncertain macroeconomic environment, partially offset by strong performance in Fixed Income. •Wealth Management delivered net revenues of $24.4 billion and a pre-tax margin of 27.0% or 28.4% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). The business added net new assets of $311 billion, representing a full year 6% annualized growth rate from beginning period assets.•Investment Management reported net revenues of $5.4 billion and AUM of $1.3 trillion in a challenging market environment.Strategic Transactions•On March 1, 2021, we completed the acquisition of Eaton Vance. For further information, see “Business Segments—Investment Management” herein and Note 3 to the financial statements.•On October 2, 2020, we completed the acquisition of E*TRADE. For further information, see “Business Segments—Wealth Management” herein and Note 3 to the financial statements.Net Revenues($ in millions)Net Income Applicable to Morgan Stanley($ in millions)Earnings per Diluted Common Share11.Adjusted Diluted EPS was $6.36, $8.22 and $6.58 in 2022, 2021 and 2020, respectively (see “Selected Non-GAAP Financial Information” herein).2022 Compared with 2021 •We reported net revenues of $53.7 billion in 2022 compared with $59.8 billion in 2021. For 2022, net income applicable to Morgan Stanley was $11.0 billion, or $6.15 per diluted common share, compared with $15.0 billion, or $8.03 per diluted common share in 2021. Executive SummaryOverview of Financial ResultsConsolidated Results—Full Year ended December 31, 2022•The Firm reported net revenues of $53.7 billion and net income of $11.0 billion as our businesses navigated a challenging market environment.•The Firm delivered ROTCE of 15.3%, or 15.7% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 73%, or 72% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein).•At December 31, 2022, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.3%.•Institutional Securities reported net revenues of $24.4 billion reflecting lower activity in Investment Banking driven by the uncertain macroeconomic environment, partially offset by strong performance in Fixed Income. •Wealth Management delivered net revenues of $24.4 billion and a pre-tax margin of 27.0% or 28.4% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). The business added net new assets of $311 billion, representing a full year 6% annualized growth rate from beginning period assets.•Investment Management reported net revenues of $5.4 billion and AUM of $1.3 trillion in a challenging market environment.Strategic Transactions•On March 1, 2021, we completed the acquisition of Eaton Vance. For further information, see “Business Segments—Investment Management” herein and Note 3 to the financial statements.•On October 2, 2020, we completed the acquisition of E*TRADE. For further information, see “Business Segments—Wealth Management” herein and Note 3 to the financial statements." }, { "status": "MODIFIED", "current_title": "Culture, Values and Conduct of Employees", "prior_title": "Culture, Values and Conduct of Employees", "similarity_score": 0.905, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, Independent Risk Management functions such as Financial Risk Management and Non-Financial Risk Management, and Internal Audit).\"", "Reworded sentence: \"Control function management meets to discuss employees whose conduct is not in line with our expectations.\"", "Reworded sentence: \"We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk-appetite statement.\"", "Reworded sentence: \"Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures), by measures of position size and sensitivity, and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units.\"", "Reworded sentence: \"We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk-appetite statement.\"" ], "current_body": "Employees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, Independent Risk Management functions such as Financial Risk Management and Non-Financial Risk Management, and Internal Audit). The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Board’s Corporate Governance Policies. Senior management committees oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of these programs is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every 63December 2023 Form 10-K 63December 2023 Form 10-K 63December 2023 Form 10-K 63 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing conduct risk (i.e., the risk arising from misconduct by employees or contingent workers) and conduct risk incidents at the Firm.The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current-year compensation and/or prior-year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Control function management meets to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions.The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.Risk Limits FrameworkRisk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk-appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities.Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits.Risk Management ProcessIn subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.Market RiskMarket risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest rate risk) from lending and deposit-taking activities. The Investment Management business segment primarily incurs non-trading market risk from capital investments in its funds. Market risk also includes non-trading interest rate risk. Non-trading interest rate risk in the banking book (amounts classified for regulatory capital purposes under the banking book regime) refers to the exposure that a change in interest rates will result in prospective earnings changes for assets and liabilities in the banking book.Sound market risk management is an integral part of our culture. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. The control groups help ensure that these risks are measured and closely monitored and are made transparent to senior management. The Market Risk Department is responsible for ensuring the transparency of material market risks, monitoring compliance with established limits and escalating risk concentrations to appropriate senior management.To execute these responsibilities, the Market Risk Department monitors our risk against limits on aggregate risk exposures, performs a variety of risk analyses, routinely reports risk summaries, and maintains our VaR and scenario analysis systems. Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures), by measures of position size and sensitivity, and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units. The material risks identified by these processes are summarized in reports produced by the Market Risk employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing conduct risk (i.e., the risk arising from misconduct by employees or contingent workers) and conduct risk incidents at the Firm.The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current-year compensation and/or prior-year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Control function management meets to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions.The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.Risk Limits FrameworkRisk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk-appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities.Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits.Risk Management ProcessIn subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing conduct risk (i.e., the risk arising from misconduct by employees or contingent workers) and conduct risk incidents at the Firm. The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current-year compensation and/or prior-year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Control function management meets to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions. The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.", "prior_body": "Employees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, control functions such as Risk Management and Compliance, and Internal Audit). The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Firm’s Corporate Governance Policies. Our Culture, Values and Conduct Committee, along with the Compliance and Conduct Risk Committee, are the senior management committees that oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of this program is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing Conduct Risk (i.e., the risk arising from misconduct by employees or contingent workers) and Conduct Risk incidents at the Firm. The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current year compensation and/or prior year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Management committees from control functions periodically meet to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions. 55December 2022 Form 10-K 55December 2022 Form 10-K 55December 2022 Form 10-K 55 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.Risk Limits FrameworkRisk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities.Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits.Risk Management ProcessIn subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.Market RiskMarket risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest rate risk) from lending and deposit-taking activities. The Investment Management business segment primarily incurs non-trading market risk from capital investments in its funds. Market risk also includes non-trading interest rate risk. Non-trading interest rate risk in the banking book (amounts classified for regulatory capital purposes under the banking book regime) refers to the exposure that a change in interest rates will result in prospective earnings changes for assets and liabilities in the banking book.Sound market risk management is an integral part of our culture. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. The control groups help ensure that these risks are measured and closely monitored and are made transparent to senior management. The Market Risk Department is responsible for ensuring the transparency of material market risks, monitoring compliance with established limits and escalating risk concentrations to appropriate senior management.To execute these responsibilities, the Market Risk Department monitors our risk against limits on aggregate risk exposures, performs a variety of risk analyses, routinely reports risk summaries, and maintains our VaR and scenario analysis systems. Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures); by measures of position size and sensitivity; and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units. The material risks identified by these processes are summarized in reports produced by the Market Risk Department that are circulated to and discussed with senior management, the FRC, the BRC and the Board.Trading RisksPrimary Market Risk Exposures and Market Risk ManagementWe have exposures to a wide range of risks related to interest rates and credit spreads, equity prices, foreign exchange rates and commodity prices as well as the associated implied volatilities, correlations and spreads of the global markets in which we conduct our trading activities.We are exposed to interest rate and credit spread risk as a result of our market-making activities and other trading in interest rate-sensitive financial instruments (i.e., risk arising from changes in the level or implied volatility of interest rates, the timing of mortgage prepayments, the shape of the yield curve and/or credit spreads). The activities from which those exposures arise and the markets in which we are active include, but are not limited to, the following: derivatives, corporate and government debt across both developed and The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies.Risk Limits FrameworkRisk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities.Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits.Risk Management ProcessIn subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.Market RiskMarket risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest The Firm’s clawback and cancellation provisions apply to deferred incentive compensation and cover a broad scope of employee conduct, including any act or omission (including with respect to direct supervisory responsibilities) that constitutes a breach of obligation to the Firm or causes a restatement of the Firm’s financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of risk management policies." }, { "status": "MODIFIED", "current_title": "Secured Financing", "prior_title": "Secured Financing", "similarity_score": 0.904, "confidence": "high", "key_changes": [ "Reworded sentence: \"The liquid nature of the marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet.\"", "Reworded sentence: \"Accordingly, we actively manage our secured financings based on the quality of the assets being funded.We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption.\"", "Reworded sentence: \"As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.In general, we maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.Collateralized Financing Transactions$ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet.See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 8 to the financial statements for additional information on collateralized financing transactions.In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements.\"", "Reworded sentence: \"Our risk exposure on these transactions is mitigated by provides us with flexibility in managing the composition of our balance sheet.\"", "Reworded sentence: \"We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption.\"" ], "current_body": "The liquid nature of the marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded.We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.In general, we maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.Collateralized Financing Transactions$ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet.See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 8 to the financial statements for additional information on collateralized financing transactions.In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded. We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities. In general, we maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.", "prior_body": "The liquid nature of the marketable securities and short-term receivables arising principally from sales and trading 43December 2022 Form 10-K 43December 2022 Form 10-K 43December 2022 Form 10-K 43 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded.We have established longer tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.We generally maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.Collateralized Financing Transactions$ in millionsAtDecember 31,2022 AtDecember 31,2021 Securities purchased under agreements to resell and Securities borrowed$247,281 $249,712 Securities sold under agreements to repurchase and Securities loaned$78,213 $74,487 Securities received as collateral1$9,954 $10,504 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022December 31, 2021Securities purchased under agreements to resell and Securities borrowed$261,627 $236,327 Securities sold under agreements to repurchase and Securities loaned$77,268 $69,565 1.Included within Trading assets in the balance sheet.See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 9 to the financial statements for additional information on collateralized financing transactions.In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework. Unsecured FinancingWe view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 7 and 14 to the financial statements).Deposits$ in millionsAtDecember 31,2022 AtDecember 31,2021 Savings and demand deposits:Brokerage sweep deposits1$202,592 $298,352 Savings and other117,356 34,395 Total Savings and demand deposits319,948 332,747 Time deposits36,698 14,827 Total2$356,646 $347,574 1.Amounts represent balances swept from client brokerage accounts.2.Excludes approximately $6 billion and $9 billion of off-balance sheet deposits at unaffiliated financial institutions as of December 31, 2022 and December 31, 2021, respectively. This client cash held by third parties is not reflected in our balance sheet and is not immediately available for liquidity purposes.Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics. The increase in total deposits in 2022 was primarily driven by higher Savings and other and Time deposits, partially offset by a reduction in Brokerage sweep deposits.Borrowings by Remaining Maturity at December 31, 20221$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $4,191 $4,191 Original maturities greater than one year2023$11,007 $7,903 $18,910 202419,618 10,224 29,842 202521,462 8,773 30,235 202623,622 5,376 28,998 202717,072 6,489 23,561 Thereafter76,855 25,466 102,321 Total$169,636 $64,231 $233,867 Total Borrowings$169,636 $68,422 $238,058 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded.We have established longer tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.We generally maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.Collateralized Financing Transactions$ in millionsAtDecember 31,2022 AtDecember 31,2021 Securities purchased under agreements to resell and Securities borrowed$247,281 $249,712 Securities sold under agreements to repurchase and Securities loaned$78,213 $74,487 Securities received as collateral1$9,954 $10,504 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022December 31, 2021Securities purchased under agreements to resell and Securities borrowed$261,627 $236,327 Securities sold under agreements to repurchase and Securities loaned$77,268 $69,565 1.Included within Trading assets in the balance sheet.See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 9 to the financial statements for additional information on collateralized financing transactions.In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded. We have established longer tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities. We generally maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity." }, { "status": "MODIFIED", "current_title": "G-SIB Capital Surcharge", "prior_title": "G-SIB Capital Surcharge", "similarity_score": 0.901, "confidence": "high", "key_changes": [ "Reworded sentence: \"The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S.\"", "Reworded sentence: \"TLAC buffer requirements are imposed on top of both the risk-based and leverage exposure-based external TLAC minimum requirements.\"", "Reworded sentence: \"interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.\"" ], "current_body": "We and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”).These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. TLAC buffer requirements are imposed on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.", "prior_body": "We and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and December 2022 Form 10-K48 December 2022 Form 10-K48 December 2022 Form 10-K48 48 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”).These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. The final rule imposes TLAC buffer requirements on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers.Required and Actual TLAC and Eligible LTD Ratios ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2022 AtDecember 31,2021 External TLAC2$245,951 $235,681 External TLAC as a % of RWA18.0 %21.5 %54.9 %49.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %16.0 %Eligible LTD3$159,444 $144,659 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %30.7 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %9.8 %1.Required ratios are inclusive of applicable buffers.2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.We are in compliance with all TLAC requirements as of December 31, 2022 and December 31, 2021.Capital Plans, Stress Tests and the Stress Capital BufferThe Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”).These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. The final rule imposes TLAC buffer requirements on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher." }, { "status": "MODIFIED", "current_title": "Resolution and Recovery Planning", "prior_title": "Resolution and Recovery Planning", "similarity_score": 0.901, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are required to submit once every two years to the Federal Reserve and the FDIC (“Agencies”) a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S.\"", "Reworded sentence: \"In November 2022, we received joint feedback on our 2021 resolution plan from the Agencies.\"", "Reworded sentence: \"The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC.\"", "Reworded sentence: \"The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.\"" ], "current_body": "We are required to submit once every two years to the Federal Reserve and the FDIC (“Agencies”) a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Agencies. The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior shortcoming identified by the Agencies in the review of our 2019 full resolution plan. We submitted our 2023 full resolution plan on June 30, 2023. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.”As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company.For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”Regulatory Developments and Other MattersReplacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate BenchmarksCentral banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). With the cessation of publication of U.S. dollar LIBOR rates on a representative basis as of June 30, 2023, all LIBOR publications have ceased on a representative basis. However, the one-, three- and six-month U.S. dollar LIBOR and three-month sterling LIBOR rates are being published for a limited period for use in legacy transactions on the basis of a on June 30, 2023. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.” As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support. The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company. For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”", "prior_body": "We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2021 targeted resolution plan on June 30, 2021. In November 2022, we received joint feedback on our 2021 resolution plan from the Federal Reserve and the FDIC (“Agencies”). The feedback indicated that there are no shortcomings or deficiencies in our 2021 resolution plan and that we had successfully addressed a prior December 2022 Form 10-K50 December 2022 Form 10-K50 December 2022 Form 10-K50 50 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents shortcoming identified by the Agencies in the review of our 2019 resolution plan. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.”As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company.For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”Regulatory Developments and Other MattersCovered Fund Restrictions under the Volcker RuleThe Volcker Rule prohibits certain investments and relationships by banking entities with covered funds, as defined in the Volcker Rule. During the current quarter, we have continued our assessment of conformance options permitted under the Volcker Rule with respect to certain legacy illiquid funds for which we previously received a conformance extension until July 21, 2023. These conformance options include, but are not limited to, restructuring our investments, selling a portion or all of our interests in certain legacy illiquid funds and relying on other applicable exemptions and exclusions under the Volcker Rule. As of December 31, 2022, the carrying value of our investments in those legacy illiquid funds approximated $230 million. Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate BenchmarksCentral banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and is a multi-year initiative.The publication of most non-U.S. dollar LIBOR rates ceased as of the end of December 2021, although certain Sterling and Yen LIBOR rates have been published for a limited period following this date on the basis of a “synthetic” methodology (known as “synthetic LIBOR”). The synthetic Yen LIBOR rates ceased as of the end of December 2022 and the U.K. Financial Conduct Authority (“UK FCA”), which regulates the publisher of LIBOR (ICE Benchmark Administration), has announced that publication of the one- and six-month tenors of synthetic Sterling LIBOR will cease at the end of March 2023 and the three-month synthetic Sterling LIBOR at the end of March 2024.U.S. dollar LIBOR rates are expected to cease being published as of the end of June 2023. On March 15, 2022 the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain U.S. law-governed contracts under certain circumstances with a SOFR-based rate identified in a Federal Reserve rule plus a statutory spread adjustment. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of any state or local law, statute, rule, regulation or standard. In addition, the UK FCA is considering the continued publication of the one-, three- and six-month tenors of U.S. dollar LIBOR on a synthetic basis until the end of September 2024. This may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation to remain on synthetic U.S. dollar LIBOR until the end of this period.As of December 31, 2022, our LIBOR-referenced contracts were primarily concentrated in derivative contracts and, to a lesser extent, loans, floating rate notes, preferred shares, securitizations and mortgages. A significant majority of our derivative contracts, and a majority of our non-derivative contracts, contain fallback provisions or otherwise have an expected path that will allow for the transition to an alternative reference rate upon the cessation of the applicable LIBOR rate. While we have made substantial progress in the transition away from the IBORs, we nonetheless currently remain party to a significant number of U.S. dollar LIBOR-linked shortcoming identified by the Agencies in the review of our 2019 resolution plan. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.”As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company.For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”Regulatory Developments and Other MattersCovered Fund Restrictions under the Volcker RuleThe Volcker Rule prohibits certain investments and relationships by banking entities with covered funds, as defined in the Volcker Rule. During the current quarter, we have continued our assessment of conformance options permitted under the Volcker Rule with respect to certain legacy illiquid funds for which we previously received a conformance extension until July 21, 2023. These conformance options include, but are not limited to, restructuring our investments, selling a portion or all of our interests in certain legacy illiquid funds and relying on other applicable exemptions and exclusions under the Volcker Rule. shortcoming identified by the Agencies in the review of our 2019 resolution plan. For more information about resolution planning requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning.” As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support. The obligations of the Parent Company and the Funding IHC under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets) and the assets of the Funding IHC. As a result, claims of our supported entities, including the Funding IHC, with respect to the secured assets, are effectively senior to unsecured obligations of the Parent Company. For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk.”" }, { "status": "MODIFIED", "current_title": "Return on Tangible Common Equity Goal", "prior_title": "Return on Tangible Common Equity Goal", "similarity_score": 0.901, "confidence": "high", "key_changes": [ "Reworded sentence: \"We have an ROTCE goal of 20%.\"" ], "current_body": "We have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors. See “Risk Factors” and “Forward-Looking Statements” herein for further information on market and economic conditions and their potential effects on our future operating results. ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.", "prior_body": "We have an ROTCE goal of over 20%. Our ROTCE goal is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors. See “Risk Factors” herein for further information on market and economic conditions and their potential effects on our future operating results. For further information on non-GAAP measures (ROTCE excluding integration-related expenses), see “Selected Non-GAAP Financial Information” herein." }, { "status": "MODIFIED", "current_title": "We are exposed to the risk that third parties that are indebted to us will not perform their obligations.", "prior_title": "We are exposed to the risk that third-parties that are indebted to us will not perform their obligations.", "similarity_score": 0.9, "confidence": "high", "key_changes": [ "Reworded sentence: \"This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses; providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.\"", "Reworded sentence: \"Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region.\"", "Reworded sentence: \"Increased centralization of trading activities through particular clearinghouses, central agents or exchanges may increase our concentration of risk with respect to these entities.\"", "Reworded sentence: \"Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region.\"" ], "current_body": "We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses; providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans. We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, residential mortgage loans, including home equity lines of credit (“HELOCs”), and structured loans to ultra-high net worth clients, that are in most cases secured by various types of collateral whose value may at times be insufficient to fully cover the loan repayment amount, including marketable securities, private investments, commercial real estate and other financial assets. Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate and other asset values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher-than-anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring, (ii) over-collateralization, (iii) ability to call for additional collateral or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region. Although our models and estimates account for correlations among related types of exposures, a change in the market or economic environment for a concentrated product or an external factor impacting a concentrated counterparty, sector, portfolio, industry or geographic region may result in credit losses in excess of amounts forecast. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.A default by a large financial institution could adversely affect financial markets.The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearinghouses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions, or require Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate and other asset values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher-than-anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring, (ii) over-collateralization, (iii) ability to call for additional collateral or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region. Although our models and estimates account for correlations among related types of exposures, a change in the market or economic environment for a concentrated product or an external factor impacting a concentrated counterparty, sector, portfolio, industry or geographic region may result in credit losses in excess of amounts forecast. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.” In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.", "prior_body": "We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearing houses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans. We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, and residential mortgage loans, including HELOCs. Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates, and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher than anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring; (ii) over-collateralization; (iii) ability to call for additional collateral; or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, industry or country. Although our models and estimates account for correlations among related types of exposures, a change in the market environment for a concentrated product or an external factor impacting a concentrated counterparty, industry or country may result in credit losses in excess of amounts forecast. In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.A default by a large financial institution could adversely affect financial markets.The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearing houses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearing houses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”Operational RiskOperational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyber-attacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring; (ii) over-collateralization; (iii) ability to call for additional collateral; or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, industry or country. Although our models and estimates account for correlations among related types of exposures, a change in the market environment for a concentrated product or an external factor impacting a concentrated counterparty, industry or country may result in credit losses in excess of amounts forecast. In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee." }, { "status": "MODIFIED", "current_title": "A cyberattack, information or security breach or a technology failure of ours or a third party could adversely affect our ability to conduct our business or manage our exposure to risk, or result in disclosure or misuse of personal, confidential or proprietary information and otherwise adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.", "prior_title": "A cyber-attack, information or security breach or a technology failure of ours or a third-party could adversely affect our ability to conduct our business, manage our exposure to risk, or result in disclosure or misuse of confidential or proprietary information and otherwise adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.", "similarity_score": 0.898, "confidence": "high", "key_changes": [ "Reworded sentence: \"Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies; the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions; and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, state-sponsored actors and other parties.\"", "Reworded sentence: \"These risks may be heightened by several factors, including remote work, reliance on new technologies (such as generative artificial intelligence) or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers.\"", "Reworded sentence: \"A cyberattack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems and networks.\"", "Reworded sentence: \"A cyberattack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems and networks.\"", "Reworded sentence: \"During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, if at all, all or any of which would further increase the costs and consequences of a cyberattack or information security incident.While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur.\"" ], "current_body": "Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies; the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions; and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, state-sponsored actors and other parties. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors or other third parties or users of our systems to disclose sensitive information in order to gain access to our networks, systems or data or those of our employees or clients, and such parties may see their effectiveness enhanced by the use of artificial intelligence. Global events and geopolitical instability have also led to increased nation-state targeting of financial institutions in the U.S. and abroad. Information security risks may also derive from human error, fraud or malice on the part of our employees or third parties, software bugs, server malfunctions, software or hardware failure or other technological failure. For example, human error has led to the loss of the Firm's physical data-bearing devices in the past. These risks may be heightened by several factors, including remote work, reliance on new technologies (such as generative artificial intelligence) or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third parties with whom we do business or share information, and each of their service providers, our regulators and the third parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity and information security risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyberattacks are complex, frequently change and are difficult to anticipate. Like other financial services firms, the Firm, its third-party providers and its clients continue to be the subject of unauthorized access attacks; mishandling, loss, theft or misuse of information; computer viruses or malware; cyberattacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or networks or cause other damage; ransomware; denial of service attacks; data breaches; social engineering attacks; phishing attacks; and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cybersecurity incidents will not occur in the future and they could occur more frequently and on a more significant scale.We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyberattack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems and networks. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of personal, confidential, proprietary and other information of ours, our employees, our customers or of other third parties. Any of these events could result in reputational damage with increased nation-state targeting of financial institutions in the U.S. and abroad. Information security risks may also derive from human error, fraud or malice on the part of our employees or third parties, software bugs, server malfunctions, software or hardware failure or other technological failure. For example, human error has led to the loss of the Firm's physical data-bearing devices in the past. These risks may be heightened by several factors, including remote work, reliance on new technologies (such as generative artificial intelligence) or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third parties with whom we do business or share information, and each of their service providers, our regulators and the third parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity and information security risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyberattacks are complex, frequently change and are difficult to anticipate. Like other financial services firms, the Firm, its third-party providers and its clients continue to be the subject of unauthorized access attacks; mishandling, loss, theft or misuse of information; computer viruses or malware; cyberattacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or networks or cause other damage; ransomware; denial of service attacks; data breaches; social engineering attacks; phishing attacks; and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cybersecurity incidents will not occur in the future and they could occur more frequently and on a more significant scale. We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyberattack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems and networks. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of personal, confidential, proprietary and other information of ours, our employees, our customers or of other third parties. Any of these events could result in reputational damage with December 2023 Form 10-K16 December 2023 Form 10-K16 December 2023 Form 10-K16 16 Table of Contents Table of Contents Table of Contents our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which could adversely affect our business, financial condition or results of operations.Given our global footprint and the high volume of transactions we process; the large number of clients, partners, vendors and counterparties with which we do business; and the increasing sophistication of cyberattacks, a cyberattack or information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, if at all, all or any of which would further increase the costs and consequences of a cyberattack or information security incident.While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover any or all losses we may incur, and we cannot be sure that such insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurers will not deny coverage as to any future claim.We continue to make investments with a view toward maintaining and enhancing our cybersecurity, resilience and information security posture, including investments in technology and associated technology risk management activities. The cost of managing cybersecurity and information security risks and attacks along with complying with new, increasingly expansive and evolving regulatory requirements could adversely affect our results of operations and business.Liquidity RiskLiquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding.In addition, our ability to raise funding could be impaired if investors, depositors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading, credit or operational losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition.Our borrowing costs and access to the debt capital markets depend on our credit ratings.The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industrywide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions.Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which could adversely affect our business, financial condition or results of operations.Given our global footprint and the high volume of transactions we process; the large number of clients, partners, vendors and counterparties with which we do business; and the increasing sophistication of cyberattacks, a cyberattack or information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, if at all, all or any of which would further increase the costs and consequences of a cyberattack or information security incident.While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover any or all losses we may incur, and we cannot be sure that such insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurers will not deny coverage as to any future claim.We continue to make investments with a view toward maintaining and enhancing our cybersecurity, resilience and information security posture, including investments in technology and associated technology risk management activities. The cost of managing cybersecurity and information security risks and attacks along with complying with new, increasingly expansive and evolving regulatory requirements could adversely affect our results of operations and business.Liquidity RiskLiquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which could adversely affect our business, financial condition or results of operations. Given our global footprint and the high volume of transactions we process; the large number of clients, partners, vendors and counterparties with which we do business; and the increasing sophistication of cyberattacks, a cyberattack or information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, if at all, all or any of which would further increase the costs and consequences of a cyberattack or information security incident. While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover any or all losses we may incur, and we cannot be sure that such insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurers will not deny coverage as to any future claim. We continue to make investments with a view toward maintaining and enhancing our cybersecurity, resilience and information security posture, including investments in technology and associated technology risk management activities. The cost of managing cybersecurity and information security risks and attacks along with complying with new, increasingly expansive and evolving regulatory requirements could adversely affect our results of operations and business.", "prior_body": "Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external extremist parties, including foreign state actors, in some circumstances as a means to promote political ends. Global events and geopolitical instability (including the war between Russia and Ukraine) may lead to increased nation state targeting of financial institutions in the U.S. and abroad. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors, or other third-parties or users of our systems to disclose sensitive information in order to gain access to our data or that of our employees or clients. Information security risks may also derive from human error, fraud or malice on the part of our employees or third-parties, or may result from accidental technological failure. For example, human error has led to the loss of the Firm's physical data-bearing devices in the past. These risks may be heightened by several factors, including remote work, or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third-parties with whom we do business or share information, our regulators, and each of their service providers, as well as the third-parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity and information security risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyber-attacks are complex and frequently change, and are difficult to anticipate. Like other financial services firms, the Firm, its third-party providers, and its clients continue to be the subject of unauthorized access attacks, mishandling or misuse of information, computer viruses or malware, cyber-attacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, ransomware, denial of service attacks, data breaches, social engineering attacks and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cyber incidents will not occur in the future, and they could occur more frequently and on a more significant scale.We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyber-attack, information or security breach, or a technology failure of ours or of a third-party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third-parties’ computer systems. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third-parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of other third-parties. Any of these events could result in reputational damage with our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which could adversely affect our business, financial condition or results of operations.Given our global footprint and the high volume of transactions we process, the large number of clients, partners, vendors and counterparties with which we do business, and the increasing sophistication of cyber-attacks, a cyber-attack, information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all or any of which would further increase the costs and consequences of a cyber-attack or data breach.While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber information, computer viruses or malware, cyber-attacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, ransomware, denial of service attacks, data breaches, social engineering attacks and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cyber incidents will not occur in the future, and they could occur more frequently and on a more significant scale. We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyber-attack, information or security breach, or a technology failure of ours or of a third-party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third-parties’ computer systems. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third-parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of other third-parties. Any of these events could result in reputational damage with our clients and the market, client dissatisfaction, additional costs to us to maintain and update our operational and security systems and infrastructure, violation of the applicable data protection and privacy laws, regulatory investigations and enforcement actions, litigation exposure, or fines or penalties, any of which could adversely affect our business, financial condition or results of operations. Given our global footprint and the high volume of transactions we process, the large number of clients, partners, vendors and counterparties with which we do business, and the increasing sophistication of cyber-attacks, a cyber-attack, information or security breach could occur and persist for an extended period of time without detection. It could take considerable time for us to determine the scope, extent, amount and type of information compromised, and the impact of such an attack may not be fully understood. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all or any of which would further increase the costs and consequences of a cyber-attack or data breach. While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber December 2022 Form 10-K12 December 2022 Form 10-K12 December 2022 Form 10-K12 12 Table of Contents Table of Contents Table of Contents and information security risks, such insurance coverage may be insufficient to cover all losses we may incur.We continue to make investments with a view toward maintaining and enhancing our cybersecurity and information security posture. The cost of managing cyber and information security risks and attacks along with complying with new, increasingly expansive, and evolving regulatory requirements could adversely affect our results of operations and business.Liquidity RiskLiquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding.In addition, our ability to raise funding could be impaired if investors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition.Our borrowing costs and access to the debt capital markets depend on our credit ratings.The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industry-wide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions.Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer term counterparty performance is a key consideration, such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade.Termination of our trading and other agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”We are a holding company and depend on payments from our subsidiaries.The Parent Company has no operations and depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such and information security risks, such insurance coverage may be insufficient to cover all losses we may incur.We continue to make investments with a view toward maintaining and enhancing our cybersecurity and information security posture. The cost of managing cyber and information security risks and attacks along with complying with new, increasingly expansive, and evolving regulatory requirements could adversely affect our results of operations and business.Liquidity RiskLiquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding.In addition, our ability to raise funding could be impaired if investors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, and information security risks, such insurance coverage may be insufficient to cover all losses we may incur. We continue to make investments with a view toward maintaining and enhancing our cybersecurity and information security posture. The cost of managing cyber and information security risks and attacks along with complying with new, increasingly expansive, and evolving regulatory requirements could adversely affect our results of operations and business." }, { "status": "MODIFIED", "current_title": "95%/One-Day Management VaR", "prior_title": "95%/One-Day Management VaR", "similarity_score": 0.894, "confidence": "high", "key_changes": [ "Reworded sentence: \"2023$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$29 $34 $43 $27 Equity price19 24 38 15 Foreign exchange rate6 9 18 5 Commodity price11 17 35 10 Less: Diversification benefit2(27)(40)N/AN/APrimary Risk Categories$38 $44 $60 $33 Credit Portfolio25 21 25 18 Less: Diversification benefit2(22)(15)N/AN/ATotal Management VaR$41 $50 $72 $41 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 41 15 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure.\"", "Reworded sentence: \"Average Total Management VaR and Average Management VaR for the Primary Risk Categories decreased in 2023 from 2022 primarily due to reduced exposure in the Commodity price risk category and lower market volatility.\"" ], "current_body": "2023$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$29 $34 $43 $27 Equity price19 24 38 15 Foreign exchange rate6 9 18 5 Commodity price11 17 35 10 Less: Diversification benefit2(27)(40)N/AN/APrimary Risk Categories$38 $44 $60 $33 Credit Portfolio25 21 25 18 Less: Diversification benefit2(22)(15)N/AN/ATotal Management VaR$41 $50 $72 $41 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 41 15 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure. 2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. Average Total Management VaR and Average Management VaR for the Primary Risk Categories decreased in 2023 from 2022 primarily due to reduced exposure in the Commodity price risk category and lower market volatility.", "prior_body": "2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 4115 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 2021$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$21 $29 $41 $21 Equity price20 26 170 19 Foreign exchange rate6 9 24 4 Commodity price16 14 27 8 Less: Diversification benefit2(31)(32)N/AN/APrimary Risk Categories$32 $46 $171 $32 Credit Portfolio12 15 31 11 Less: Diversification benefit2(12)(11)N/AN/ATotal Management VaR$32 $50 $175 $32 High1 Low1 Less: Diversification benefit2 Less: Diversification benefit2 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure. 2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. Average Total Management VaR and Average Management VaR for the Primary Risk Categories increased in 2022 from 2021 primarily due to increased market volatility in the interest rate and credit spread categories, as well as the commodity price category which was partially offset by increased diversification benefit." }, { "status": "MODIFIED", "current_title": "Common Stock Dividend Announcement", "prior_title": "Common Stock Dividend Announcement", "similarity_score": 0.885, "confidence": "high", "key_changes": [ "Reworded sentence: \"Announcement dateJanuary 16, 2024Amount per share$0.85Date paidFebruary 15, 2024Shareholders of record as ofJanuary 31, 2024 For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.\"" ], "current_body": "Announcement dateJanuary 16, 2024Amount per share$0.85Date paidFebruary 15, 2024Shareholders of record as ofJanuary 31, 2024 For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein. For additional information on our common stock and information on our preferred stock, see Note 17 to the financial statements.", "prior_body": "Announcement dateJanuary 17, 2023Amount per share$0.775Date paidFebruary 15, 2023Shareholders of record as ofJanuary 31, 2023 For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein. For additional information on our common stock and information on our preferred stock, see Note 18 to the financial statements." }, { "status": "MODIFIED", "current_title": "Risk Mitigation", "prior_title": "Risk Mitigation", "similarity_score": 0.881, "confidence": "high", "key_changes": [ "Reworded sentence: \"See Note 8 to the financial statements for additional information about our collateralized transactions.Loans and Lending Commitments At December 31, 2023$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,758 $11,862 $— $18,620 Secured lending facilities39,498 3,161 — 42,659 Commercial and Residential real estate8,678 209 3,331 12,218 Securities-based lending and Other2,818 — 4,402 7,220 Total Institutional Securities57,752 15,232 7,733 80,717 Wealth Management:Residential real estate60,375 22 — 60,397 Securities-based lending and Other86,423 1 — 86,424 Total Wealth Management146,798 23 — 146,821 Total Investment Management24 — 455 459 Total loans204,554 15,255 8,188 227,997 ACL(1,169)(1,169)Total loans, net of ACL$203,385 $15,255 $8,188 $226,828 Lending commitments3$149,973 Total exposure$376,801 At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.FVO includes the fair value of certain unfunded lending commitments.2.Investment Management business segment loans are related to certain of our activities as an investment adviser and manager.\"", "Reworded sentence: \"See Note 8 to the financial statements for additional information about our collateralized transactions.\"" ], "current_body": "We may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets.In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 8 to the financial statements for additional information about our collateralized transactions.Loans and Lending Commitments At December 31, 2023$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,758 $11,862 $— $18,620 Secured lending facilities39,498 3,161 — 42,659 Commercial and Residential real estate8,678 209 3,331 12,218 Securities-based lending and Other2,818 — 4,402 7,220 Total Institutional Securities57,752 15,232 7,733 80,717 Wealth Management:Residential real estate60,375 22 — 60,397 Securities-based lending and Other86,423 1 — 86,424 Total Wealth Management146,798 23 — 146,821 Total Investment Management24 — 455 459 Total loans204,554 15,255 8,188 227,997 ACL(1,169)(1,169)Total loans, net of ACL$203,385 $15,255 $8,188 $226,828 Lending commitments3$149,973 Total exposure$376,801 At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.FVO includes the fair value of certain unfunded lending commitments.2.Investment Management business segment loans are related to certain of our activities as an investment adviser and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets. In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 8 to the financial statements for additional information about our collateralized transactions.", "prior_body": "We may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets.In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 9 to the financial statements for additional information about our collateralized transactions.Loans and Lending Commitments At December 31, 2022$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management14 — 218 222 Total loans2199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets. In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 9 to the financial statements for additional information about our collateralized transactions." }, { "status": "MODIFIED", "current_title": "Distribution of VaR Statistics and Net Revenues", "prior_title": "Distribution of VaR Statistics and Net Revenues", "similarity_score": 0.88, "confidence": "high", "key_changes": [ "Reworded sentence: \"There were 16 trading loss days in 2023, one of which exceeded 95% Total Management VaR, compared to 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR.\"", "Reworded sentence: \"The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk.\"", "Reworded sentence: \"Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios.\"" ], "current_body": "We evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There were 16 trading loss days in 2023, one of which exceeded 95% Total Management VaR, compared to 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR. December 2023 Form 10-K66 December 2023 Form 10-K66 December 2023 Form 10-K66 66 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Daily 95%/One-Day Total Management VaR for 2023($ in millions)Daily Net Trading Revenues for 2023($ in millions)Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.Non-Trading RisksWe believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.Wealth Management Net Interest Income Sensitivity Analysis$ in millionsAtDecember 31,2023 AtDecember 31,2022 Basis point change+100$585 $643 -100(609)(745)The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity, including deposit forecasts as a key assumption.We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios. The level of interest rates may impact the amount of deposits held at the Firm, given competition for deposits from other institutions and alternative cash-equivalent products available to depositors. Further, rising interest rates could also impact client demand for loans. Net interest income sensitivity to interest rates at December 31, 2023 decreased from December 31, 2022, primarily driven by the effects of changes in the mix of our assets and liabilities. Daily 95%/One-Day Total Management VaR for 2023($ in millions)Daily Net Trading Revenues for 2023($ in millions)Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.Non-Trading RisksWe believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.", "prior_body": "We evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There were 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR, compared to 14 trading loss days in 2021, one of which exceeded 95% Total Management VaR. December 2022 Form 10-K58 December 2022 Form 10-K58 December 2022 Form 10-K58 58 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Daily 95%/One-Day Total Management VaR for 2022($ in millions)Daily Net Trading Revenues for 2022($ in millions)The previous histogram shows the distribution of daily net trading revenues for 2022. Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.Non-Trading RisksWe believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2022 AtDecember 31,2021 Derivatives$7 $7 Borrowings carried at fair value39 48 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2022 decreased from December 31, 2021 primarily due to widening credit spreads, partially offset by new debt issuance.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Historically, net interest income sensitivity for our U.S. Bank Subsidiaries was representative of such sensitivity for the Wealth Management business segment and, accordingly, we presented net interest income sensitivity for our U.S. Bank Subsidiaries. However, over time the Wealth Management business segment has grown its assets that generate net interest income outside of the U.S. Bank Subsidiaries, such as margin and other lending on non-bank entities, and this growth has been further accelerated by the acquisition of E*TRADE. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.Wealth Management Net Interest Income Sensitivity Analysis1$ in millionsAtDecember 31,2022 AtDecember 31,2021 Basis point change+100$643 $1,648 -100(745)(1,023)1.The prior period has been revised to conform to the current period presentation.The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity.We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment to optimize across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Net interest income sensitivity to interest rates at December Daily 95%/One-Day Total Management VaR for 2022($ in millions)Daily Net Trading Revenues for 2022($ in millions)The previous histogram shows the distribution of daily net trading revenues for 2022. Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.Non-Trading RisksWe believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio." }, { "status": "MODIFIED", "current_title": "Daily Net Trading Revenues for 2023", "prior_title": "Daily Net Trading Revenues for 2022", "similarity_score": 0.879, "confidence": "high", "key_changes": [ "Reworded sentence: \"($ in millions) Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses.\"" ], "current_body": "($ in millions) Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.", "prior_body": "($ in millions) The previous histogram shows the distribution of daily net trading revenues for 2022. Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading." }, { "status": "MODIFIED", "current_title": "U.S. Bank Subsidiaries", "prior_title": "U.S. Bank Subsidiaries", "similarity_score": 0.879, "confidence": "high", "key_changes": [ "Reworded sentence: \"Bank Subsidiaries accept deposits, provide loans to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals, and invest in securities.\"", "Reworded sentence: \"For a further discussion about loans and lending commitments, see Notes 9 and 14 to the financial statements.\"" ], "current_body": "Our U.S. Bank Subsidiaries accept deposits, provide loans to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals, and invest in securities. Lending activity in our U.S. Bank Subsidiaries from the Institutional Securities business segment primarily includes Secured lending facilities, Commercial and Residential real estate and Corporate loans. Lending activity in our U.S. Bank Subsidiaries from the Wealth Management business segment primarily includes Securities-based lending, which allows clients to borrow money against the value of qualifying securities, and Residential real estate loans. For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. For a further discussion about loans and lending commitments, see Notes 9 and 14 to the financial statements.", "prior_body": "Our U.S. bank subsidiaries, Morgan Stanley Bank N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”) (together, “U.S. Bank Subsidiaries”), accept deposits, provide loans to a variety of customers, including large corporate and institutional clients as well as high to ultra-high net worth individuals, and invest in securities. Lending activity in the U.S. Bank Subsidiaries from the Institutional Securities business segment primarily includes Secured lending facilities and Commercial real estate loans. Lending activity in the U.S. Bank Subsidiaries from the Wealth Management business segment primarily includes Securities-based lending, which allows clients to borrow money against the value of qualifying securities, and Residential real estate loans. For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. For a further discussion about loans and lending commitments, see Notes 10 and 15 to the financial statements." }, { "status": "MODIFIED", "current_title": "Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements", "prior_title": "Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements", "similarity_score": 0.876, "confidence": "high", "key_changes": [ "Reworded sentence: \"TLAC buffer requirements are imposed on top of both the risk-based and leverage exposure-based external TLAC minimum requirements.\"", "Reworded sentence: \"December 2023 Form 10-K56 December 2023 Form 10-K56 December 2023 Form 10-K56 56 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Required and Actual TLAC and Eligible LTD Ratios ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2023 AtDecember 31,2022 External TLAC2$250,914 $245,951 External TLAC as a % of RWA18.0 %21.5 %55.0 %54.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %17.6 %Eligible LTD3$162,547 $159,444 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %35.6 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %11.4 %1.Required ratios are inclusive of applicable buffers.2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date.\"", "Reworded sentence: \"Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.We are in compliance with all TLAC requirements as of December 31, 2023 and December 31, 2022.Capital Plans, Stress Tests and the Stress Capital BufferThe Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy.\"" ], "current_body": "The Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”). These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. TLAC buffer requirements are imposed on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. December 2023 Form 10-K56 December 2023 Form 10-K56 December 2023 Form 10-K56 56 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Required and Actual TLAC and Eligible LTD Ratios ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2023 AtDecember 31,2022 External TLAC2$250,914 $245,951 External TLAC as a % of RWA18.0 %21.5 %55.0 %54.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %17.6 %Eligible LTD3$162,547 $159,444 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %35.6 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %11.4 %1.Required ratios are inclusive of applicable buffers.2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.We are in compliance with all TLAC requirements as of December 31, 2023 and December 31, 2022.Capital Plans, Stress Tests and the Stress Capital BufferThe Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated capital. The capital plan must include a discussion of how we will maintain capital above the minimum regulatory capital ratios and how we will serve as a source of strength to our U.S. Bank Subsidiaries under supervisory stress scenarios. In addition, the Federal Reserve has issued guidance setting out its heightened expectations for capital planning practices at certain large financial institutions, including us.As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us. The SCB applies only with respect to Standardized Approach risk-based capital requirements and replaced the Common Equity Tier 1 capital conservation buffer of 2.5%. The SCB is the greater of (i) the maximum decline in our Common Equity Tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period plus the sum of the four quarters of planned common stock dividends divided by the projected RWAs from the quarter in which the Firm’s projected Common Equity Tier 1 capital ratio reaches its minimum in the supervisory stress test and (ii) 2.5%. The supervisory stress test assumes that BHCs generally maintain a constant level of assets and RWAs throughout the projection period.A firm’s SCB is subject to revision each year, taking effect from October 1 to reflect the results of the Federal Reserve’s annual supervisory stress test. The Federal Reserve has discretion to recalculate a firm’s SCB outside of the October 1 annual cycle and to require approval for certain actions, in some circumstances. The Federal Reserve also has the authority to impose restrictions on capital actions as a supervisory matter.For the 2023 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2023. On June 28, 2023, the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario improved from the prior annual supervisory stress test by 50 basis points, from 4.6% to 4.1%. Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.4% from October 1, 2023 through September 30, 2024. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 12.9%. We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.85 per share from $0.775, beginning with the common stock dividend announced on July 18, 2023. Additionally, our Board of Directors reauthorized a multi-year common stock repurchase program of up to $20 billion, without a set Required and Actual TLAC and Eligible LTD Ratios ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2023 AtDecember 31,2022 External TLAC2$250,914 $245,951 External TLAC as a % of RWA18.0 %21.5 %55.0 %54.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %17.6 %Eligible LTD3$162,547 $159,444 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %35.6 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %11.4 %1.Required ratios are inclusive of applicable buffers.2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.We are in compliance with all TLAC requirements as of December 31, 2023 and December 31, 2022.Capital Plans, Stress Tests and the Stress Capital BufferThe Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated", "prior_body": "The Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”). These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. The final rule imposes TLAC buffer requirements on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Required and Actual TLAC and Eligible LTD Ratios ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2022 AtDecember 31,2021 External TLAC2$245,951 $235,681 External TLAC as a % of RWA18.0 %21.5 %54.9 %49.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %16.0 %Eligible LTD3$159,444 $144,659 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %30.7 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %9.8 %1.Required ratios are inclusive of applicable buffers.2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs.We are in compliance with all TLAC requirements as of December 31, 2022 and December 31, 2021.Capital Plans, Stress Tests and the Stress Capital BufferThe Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.The capital plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance or redemption of a debt or equity capital instrument, any capital distribution (i.e., payments of dividends or stock repurchases) and any similar action that the Federal Reserve determines could impact our consolidated" }, { "status": "MODIFIED", "current_title": "Risk-Based Regulatory Capital Ratio Requirements", "prior_title": "Risk-Based Regulatory Capital Ratio Requirements", "similarity_score": 0.876, "confidence": "high", "key_changes": [ "Reworded sentence: \"Regulatory MinimumAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %12.9%13.3%10.0%Tier 1 capital ratio6.0 %14.4%14.8%11.5%Total capital ratio8.0 %16.4%16.8%13.5% At December 31, 2023 and December 31, 2022\"" ], "current_body": "Regulatory MinimumAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %12.9%13.3%10.0%Tier 1 capital ratio6.0 %14.4%14.8%11.5%Total capital ratio8.0 %16.4%16.8%13.5% At December 31, 2023 and December 31, 2022", "prior_body": "Regulatory MinimumAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %13.3%13.2%10.0%Tier 1 capital ratio6.0 %14.8%14.7%11.5%Total capital ratio8.0 %16.8%16.7%13.5% At December 31, 2022 and December 31, 2021" }, { "status": "MODIFIED", "current_title": "Functional Risk and Control Committees", "prior_title": "Functional Risk and Control Committees", "similarity_score": 0.87, "confidence": "high", "key_changes": [ "Reworded sentence: \"December 2023 Form 10-K62 December 2023 Form 10-K62 December 2023 Form 10-K62 62 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Chief Risk OfficerThe Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer.\"", "Reworded sentence: \"The Chief Risk Officer also coordinates with the Head of NFR regarding non-financial risk, the Chief Financial Officer and the Chief Executive Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Head of Non-Financial RiskThe Head of Non-Financial Risk, who is independent of business units, reports to the Chief Legal Officer and Chief Administrative Officer.\"", "Reworded sentence: \"Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal, Regulatory and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution.\"", "Reworded sentence: \"The Chief Risk Officer also coordinates with the Head of NFR regarding non-financial risk, the Chief Financial Officer and the Chief Executive Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Head of Non-Financial RiskThe Head of Non-Financial Risk, who is independent of business units, reports to the Chief Legal Officer and Chief Administrative Officer.\"", "Reworded sentence: \"Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal, Regulatory and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution.\"" ], "current_body": "Functional risk and control committees and other committees within the ERM framework facilitate efficient and comprehensive supervision of our risk exposures and processes. Each business segment has a risk committee that is responsible for helping to ensure that the business segment, as applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement, monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework established by the FRC; and reviews, on a periodic basis, our aggregate risk exposures, risk exception experience, and the efficacy of our risk identification, measurement, monitoring and management policies and procedures, and related controls. December 2023 Form 10-K62 December 2023 Form 10-K62 December 2023 Form 10-K62 62 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Chief Risk OfficerThe Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model and liquidity risks; and reviews results of risk management processes with the Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Head of NFR regarding non-financial risk, the Chief Financial Officer and the Chief Executive Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Head of Non-Financial RiskThe Head of Non-Financial Risk, who is independent of business units, reports to the Chief Legal Officer and Chief Administrative Officer. The Head of Non-Financial Risk oversees the compliance, financial crimes and operational risk management functions; independently reviews non-financial risks, including compliance (including conduct), financial crimes, and operational (including cybersecurity) risks, as well as material regulatory risks; and reviews results of risk management processes with the Board, the BAC, the BOTC and the BRC as appropriate. The Head of Non-Financial Risk also coordinates with the Chief Risk Officer regarding financial risks.Independent Risk Management FunctionsThe Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management Departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk Departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal, Regulatory and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance and regulatory risks; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.Internal Audit DepartmentThe Internal Audit Department (“IAD”) independently identifies and assesses risks facing the Firm and provides independent, objective and timely assurance to stakeholders about the effectiveness of risk management, governance and controls over key risks within the Firm’s businesses and functions. IAD develops and executes a comprehensive risk-based assurance plan to fulfill its role and purpose, which includes assessing compliance with policies, procedures and laws and regulations. IAD may also conduct other activities, such as retrospective reviews, pre-implementation reviews and investigations as requested by the BAC, senior management or the Firm’s regulators. IAD executes its activities in accordance with the mandatory elements of The Institute of Internal Auditors’ International Professional Practices Framework as well as the Firm’s Code of Ethics and Business Conduct, regulatory requirements, and IAD’s policies, procedures, standards and guidance. The Chief Audit Officer, who reports functionally to the BAC and administratively to the Firm’s Chief Executive Officer, communicates the results of IAD activities to the BAC on a quarterly basis and periodically to the BRC and BOTC.Culture, Values and Conduct of EmployeesEmployees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, Independent Risk Management functions such as Financial Risk Management and Non-Financial Risk Management, and Internal Audit).The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Board’s Corporate Governance Policies. Senior management committees oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of these programs is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every Chief Risk OfficerThe Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model and liquidity risks; and reviews results of risk management processes with the Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Head of NFR regarding non-financial risk, the Chief Financial Officer and the Chief Executive Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Head of Non-Financial RiskThe Head of Non-Financial Risk, who is independent of business units, reports to the Chief Legal Officer and Chief Administrative Officer. The Head of Non-Financial Risk oversees the compliance, financial crimes and operational risk management functions; independently reviews non-financial risks, including compliance (including conduct), financial crimes, and operational (including cybersecurity) risks, as well as material regulatory risks; and reviews results of risk management processes with the Board, the BAC, the BOTC and the BRC as appropriate. The Head of Non-Financial Risk also coordinates with the Chief Risk Officer regarding financial risks.Independent Risk Management FunctionsThe Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management Departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk Departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal, Regulatory and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk", "prior_body": "Functional risk and control committees and other committees within the ERM framework facilitate efficient and comprehensive supervision of our risk exposures and processes. Each business segment has a risk committee that is responsible for helping to ensure that the business segment, as applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement, monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework established by the FRC; and reviews, on a periodic basis, our aggregate risk exposures, risk exception experience, and the efficacy of our risk identification, measurement, monitoring and management policies and procedures, and related controls. December 2022 Form 10-K54 December 2022 Form 10-K54 December 2022 Form 10-K54 54 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Chief Risk OfficerThe Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model and liquidity risks; and reviews results of risk management processes with the Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Chief Financial Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Independent Risk Management FunctionsThe Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology Division, Operations Division, the Human Resources Department, Corporate Services, and Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance, conduct and regulatory risk; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.Internal Audit DepartmentThe Internal Audit Department (“IAD”) independently assesses the Firm’s risk management processes and controls using methodology developed from professional auditing standards and regulatory guidance. IAD undertakes these responsibilities through periodic reviews of our business activities, operations and systems, as well as special investigations and retrospective reviews that may be specifically requested by the BAC or management. In addition to regular reports to the BAC, the Chief Audit Officer, who reports functionally to the BAC and administratively to the Chief Executive Officer, periodically reports to the BRC and BOTC on various matters of risks and controls.Culture, Values and Conduct of EmployeesEmployees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, control functions such as Risk Management and Compliance, and Internal Audit).The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Firm’s Corporate Governance Policies. Our Culture, Values and Conduct Committee, along with the Compliance and Conduct Risk Committee, are the senior management committees that oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of this program is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every employee annually is required to certify to their understanding of and adherence to the Code of Conduct. The Firm’s Global Conduct Risk Management Policy also sets out a consistent global framework for managing Conduct Risk (i.e., the risk arising from misconduct by employees or contingent workers) and Conduct Risk incidents at the Firm.The employee annual performance review process includes evaluation of employee conduct related to risk management practices and the Firm’s expectations. We also have several mutually reinforcing processes to identify employee conduct that may have an impact on employment status, current year compensation and/or prior year compensation. For example, the Global Incentive Compensation Discretion Policy sets forth standards for managers when making annual compensation decisions and specifically provides that managers must consider whether their employees effectively managed and/or supervised risk control practices during the performance year. Management committees from control functions periodically meet to discuss employees whose conduct is not in line with our expectations. These results are incorporated into identified employees’ performance reviews and compensation and promotion decisions. Chief Risk OfficerThe Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model and liquidity risks; and reviews results of risk management processes with the Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Chief Financial Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking.Independent Risk Management FunctionsThe Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal and Compliance Risk” herein.Support and Control GroupsOur support and control groups include, but are not limited to, Legal, the Finance Division, Technology Division, Operations Division, the Human Resources Department, Corporate Services, and Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance, conduct and regulatory risk; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.Internal Audit DepartmentThe Internal Audit Department (“IAD”) independently assesses the Firm’s risk management processes and controls using methodology developed from professional auditing standards and regulatory guidance. IAD undertakes these" }, { "status": "MODIFIED", "current_title": "The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.", "prior_title": "The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.", "similarity_score": 0.87, "confidence": "high", "key_changes": [ "Reworded sentence: \"These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry.\"", "Reworded sentence: \"As part of the resolution of certain investigations and proceedings, the Firm has been and may in the future be required to undertake certain measures and failure to do so may result in adverse consequences, such as further investigations or proceedings—both civil and criminal—and additional penalties, fines, judgments or other relief.\"", "Reworded sentence: \"Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages, or may result in material penalties, fines or other results adverse to us.\"", "Reworded sentence: \"Like any large corporation, we are also subject to risk from potential employee misconduct, including noncompliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.We originate loans secured by commercial and residential properties.\"", "Reworded sentence: \"For additional information, see Note 14 to the financial statements.A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business.\"" ], "current_body": "As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry. Certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas, deferred prosecution agreements or non-prosecution agreements from financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, reputation, financial condition or results of operations, and increase our exposure to civil litigation. Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions or other relief, and have included and may in the future include requirements that the Firm admit certain conduct, which may result in increased exposure to civil litigation. In addition, these measures have caused and may in the future cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses. As part of the resolution of certain investigations and proceedings, the Firm has been and may in the future be required to undertake certain measures and failure to do so may result in adverse consequences, such as further investigations or proceedings—both civil and criminal—and additional penalties, fines, judgments or other relief. The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC. We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages, or may result in material penalties, fines or other results adverse to us. In some cases, the third-party entities that would otherwise be the primary defendants in such cases are bankrupt, in financial distress or may not honor applicable indemnification December 2023 Form 10-K20 December 2023 Form 10-K20 December 2023 Form 10-K20 20 Table of Contents Table of Contents Table of Contents obligations. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including noncompliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 14 to the financial statements.A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information.We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.Our regulators also have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions. For example, our status as a BHC supervised by the Federal Reserve subjects us to direct Federal Reserve scrutiny with respect to transactions between our U.S. Bank Subsidiaries and their affiliates. Further, the Volcker Rule subjects us to regulatory scrutiny regarding certain transactions between us and our clients.Risk ManagementOur risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.As our businesses change and grow, including through acquisitions and the introduction and application of new technologies, such as artificial intelligence, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate.In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses. Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot obligations. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including noncompliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 14 to the financial statements.A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information.We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to create a conflict can put our reputation at risk even if the likelihood of an actual conflict has been mitigated. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may obligations. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including noncompliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.", "prior_body": "As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In addition to the monetary consequences, these measures could cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses. These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry, and certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas or deferred prosecution agreements from, financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, financial condition or results of operations or cause us significant reputational harm, which could seriously harm our business. The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC. We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages, claims for indeterminate amounts of damages, or may result in material penalties, fines, or other results adverse to us.In some cases, the issuers that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including non-compliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 15 to the financial statements.A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information.We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to may result in material penalties, fines, or other results adverse to us. In some cases, the issuers that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including non-compliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct." }, { "status": "MODIFIED", "current_title": "Wealth Management Net Interest Income Sensitivity Analysis", "prior_title": "Wealth Management Net Interest Income Sensitivity Analysis1", "similarity_score": 0.869, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in millionsAtDecember 31,2023 AtDecember 31,2022 Basis point change+100$585 $643 -100(609)(745) The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment.\"", "Reworded sentence: \"Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios.\"", "Reworded sentence: \"The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.Asset Management Revenue SensitivityCertain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”).\"", "Reworded sentence: \"We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following:•extending credit to clients through loans and lending commitments;•entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;•acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses;•providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the repayment amount;•posting margin and/or collateral to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties;•placing funds on deposit at other financial institutions to support our clearing and settlement obligations; and•investing or trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We incur credit risk in our Wealth Management business segment, primarily through lending to individuals and entities, including, but not limited to, the following:•margin loans collateralized by securities;•securities-based lending and other forms of secured loans, including tailored lending to ultra-high net worth clients, that are in most cases secured by various types of collateral, including marketable securities, private investments, commercial real estate and other financial assets;•single-family residential mortgage loans in conforming, non-conforming or HELOC form, primarily to existing Wealth Management clients; and•employee loans granted primarily to recruit certain Wealth Management representatives.Monitoring and ControlThe Credit Risk Management Department (“CRM”) establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels.\"", "Reworded sentence: \"The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and trading activities.\"" ], "current_body": "$ in millionsAtDecember 31,2023 AtDecember 31,2022 Basis point change+100$585 $643 -100(609)(745) The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity, including deposit forecasts as a key assumption. We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios. The level of interest rates may impact the amount of deposits held at the Firm, given competition for deposits from other institutions and alternative cash-equivalent products available to depositors. Further, rising interest rates could also impact client demand for loans. Net interest income sensitivity to interest rates at December 31, 2023 decreased from December 31, 2022, primarily driven by the effects of changes in the mix of our assets and liabilities. 67December 2023 Form 10-K 67December 2023 Form 10-K 67December 2023 Form 10-K 67 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Investments Sensitivity, Including Related Carried Interest Loss from 10% Decline$ in millionsAtDecember 31,2023 AtDecember 31,2022 Investments related to Investment Management activities$481 $431 Other investments:MUMSS134 143 Other Firm investments399 378 We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.Asset Management Revenue SensitivityCertain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets.Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following:•extending credit to clients through loans and lending commitments;•entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;•acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses;•providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the repayment amount;•posting margin and/or collateral to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties;•placing funds on deposit at other financial institutions to support our clearing and settlement obligations; and•investing or trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We incur credit risk in our Wealth Management business segment, primarily through lending to individuals and entities, including, but not limited to, the following:•margin loans collateralized by securities;•securities-based lending and other forms of secured loans, including tailored lending to ultra-high net worth clients, that are in most cases secured by various types of collateral, including marketable securities, private investments, commercial real estate and other financial assets;•single-family residential mortgage loans in conforming, non-conforming or HELOC form, primarily to existing Wealth Management clients; and•employee loans granted primarily to recruit certain Wealth Management representatives.Monitoring and ControlThe Credit Risk Management Department (“CRM”) establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels. The CRM approves extensions of credit, evaluates the creditworthiness of the counterparties and borrowers on a regular basis, and helps ensure that credit exposure is actively monitored and managed. The evaluation of counterparties and borrowers includes an assessment of the probability that an obligor will default on its financial obligations and any losses that may occur when an obligor defaults. In addition, credit risk exposure is actively managed by credit professionals and committees within the CRM and through various risk committees, whose membership includes individuals from the CRM. A comprehensive and global Credit Limits Framework is utilized to manage credit risk levels across the Firm. The Credit Limits Framework is calibrated within our risk tolerance and includes single-name limits and portfolio concentration limits by country, industry and product type.The CRM helps ensure timely and transparent communication of material credit risks, compliance with established limits and escalation of risk concentrations to appropriate senior management. The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and trading activities. The stress tests shock market factors (e.g., interest rates, commodity prices, credit spreads), risk Investments Sensitivity, Including Related Carried Interest Loss from 10% Decline$ in millionsAtDecember 31,2023 AtDecember 31,2022 Investments related to Investment Management activities$481 $431 Other investments:MUMSS134 143 Other Firm investments399 378 We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.Asset Management Revenue SensitivityCertain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets.Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following:•extending credit to clients through loans and lending commitments;•entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;•acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses;", "prior_body": "$ in millionsAtDecember 31,2022 AtDecember 31,2021 Basis point change+100$643 $1,648 -100(745)(1,023) 1.The prior period has been revised to conform to the current period presentation. The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity. We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment to optimize across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Net interest income sensitivity to interest rates at December 59December 2022 Form 10-K 59December 2022 Form 10-K 59December 2022 Form 10-K 59 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents 31, 2022 decreased from December 31, 2021, primarily driven by the effects of changes in the the mix of our assets and liabilities and significant changes in market rates.Investments Sensitivity, Including Related Carried Interest Loss from 10% Decline$ in millionsAtDecember 31,2022 AtDecember 31,2021 Investments related to Investment Management activities$431 $407 Other investments:MUMSS143 167 Other Firm investments378 331 We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable. Investments sensitivity changed between December 31, 2022 and December 31, 2021 with an increase in sensitivity in Other Firm investments primarily due to new investments in Community Reinvestment Act affordable housing, as well as lower sensitivity in MUMSS driven by Yen depreciation. Asset Management Revenue SensitivityCertain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets.Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following:•extending credit to clients through loans and lending commitments;•entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;•providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the repayment amount;•posting margin and/or collateral to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties;•placing funds on deposit at other financial institutions to support our clearing and settlement obligations; and•investing or trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We incur credit risk in our Wealth Management business segment, primarily through lending to individuals and entities, including, but not limited to, the following:•margin loans collateralized by securities;•securities-based lending and other forms of secured loans, including tailored lending to high and ultra-high net worth clients;•single-family residential mortgage loans in conforming, non-conforming or HELOC form primarily to existing Wealth Management clients; and•employee loans granted primarily to recruit certain Wealth Management representatives.Monitoring and ControlThe Credit Risk Management Department (“CRM”) establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels. The CRM approves extensions of credit, evaluates the creditworthiness of the counterparties and borrowers on a regular basis, and helps ensure that credit exposure is actively monitored and managed. The evaluation of counterparties and borrowers includes an assessment of the probability that an obligor will default on its financial obligations and any losses that may occur when an obligor defaults. In addition, credit risk exposure is actively managed by credit professionals and committees within the CRM and through various risk committees, whose membership includes individuals from the CRM. A comprehensive and global Credit Limits Framework is utilized to manage credit risk levels across the Firm. The Credit Limits Framework is calibrated within our risk tolerance and includes single-name limits and portfolio concentration limits by country, industry and product type.The CRM helps ensure timely and transparent communication of material credit risks, compliance with established limits and escalation of risk concentrations to appropriate senior management. The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and 31, 2022 decreased from December 31, 2021, primarily driven by the effects of changes in the the mix of our assets and liabilities and significant changes in market rates.Investments Sensitivity, Including Related Carried Interest Loss from 10% Decline$ in millionsAtDecember 31,2022 AtDecember 31,2021 Investments related to Investment Management activities$431 $407 Other investments:MUMSS143 167 Other Firm investments378 331 We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable. Investments sensitivity changed between December 31, 2022 and December 31, 2021 with an increase in sensitivity in Other Firm investments primarily due to new investments in Community Reinvestment Act affordable housing, as well as lower sensitivity in MUMSS driven by Yen depreciation. Asset Management Revenue SensitivityCertain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets.Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following: 31, 2022 decreased from December 31, 2021, primarily driven by the effects of changes in the the mix of our assets and liabilities and significant changes in market rates." }, { "status": "MODIFIED", "current_title": "Projected Future Compensation Obligation1", "prior_title": "Projected Future Compensation Obligation1", "similarity_score": 0.869, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in millionsAward liabilities at December 31, 20232, 3$5,331 Fully vested amounts to be distributed by the end of February 20244(905)Unrecognized portion of prior awards at December 31, 202331,373 2023 performance year awards granted in 20243357 Total5$6,156 Award liabilities at December 31, 20232, 3 Fully vested amounts to be distributed by the end of February 20244 Unrecognized portion of prior awards at December 31, 20233 2023 performance year awards granted in 20243 Total5 1.Amounts relate to performance years 2023 and prior.\"" ], "current_body": "$ in millionsAward liabilities at December 31, 20232, 3$5,331 Fully vested amounts to be distributed by the end of February 20244(905)Unrecognized portion of prior awards at December 31, 202331,373 2023 performance year awards granted in 20243357 Total5$6,156 Award liabilities at December 31, 20232, 3 Fully vested amounts to be distributed by the end of February 20244 Unrecognized portion of prior awards at December 31, 20233 2023 performance year awards granted in 20243 Total5 1.Amounts relate to performance years 2023 and prior. 2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2023. 3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments. 4.Distributions after February of each year are generally immaterial. 5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management. The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.", "prior_body": "$ in millionsAward liabilities at December 31, 20222, 3$4,880 Fully vested amounts to be distributed by the end of February 20234(729)Unrecognized portion of prior awards at December 31, 202231,096 2022 performance year awards granted in 20233384 Total5$5,631 Award liabilities at December 31, 20222, 3 Fully vested amounts to be distributed by the end of February 20234 Unrecognized portion of prior awards at December 31, 20223 2022 performance year awards granted in 20233 Total5 1.Amounts relate to performance years 2022 and prior. 2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2022. 3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments. 4.Distributions after February of each year are generally immaterial. 5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management. The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments." }, { "status": "MODIFIED", "current_title": "Self-Directed Channel", "prior_title": "Self-directed Channel", "similarity_score": 0.867, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31,2023At December 31,2022Self-directed assets (in billions)1$1,150$795Self-directed households (in millions)28.18.0 Self-directed assets (in billions)1 Self-directed households (in millions)2 202320222021Daily average revenue trades (“DARTs”) (in thousands)37598641,161 Daily average revenue trades (“DARTs”) (in thousands)3 1.Self-directed client assets represent active accounts which are not advisor led.\"", "Reworded sentence: \"2.Self-directed households represent the total number of households that include at least one active account with self-directed assets.\"" ], "current_body": "At December 31,2023At December 31,2022Self-directed assets (in billions)1$1,150$795Self-directed households (in millions)28.18.0 Self-directed assets (in billions)1 Self-directed households (in millions)2 202320222021Daily average revenue trades (“DARTs”) (in thousands)37598641,161 Daily average revenue trades (“DARTs”) (in thousands)3 1.Self-directed client assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. 2.Self-directed households represent the total number of households that include at least one active account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts. 3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.", "prior_body": "$ in billionsAt December 31,2022At December 31,2021Self-directed assets1$795$1,103Self-directed households (in millions)28.07.4 Self-directed assets1 Self-directed households (in millions)2 202220212020Daily average revenue trades (“DARTs”) (in thousands)38641,161280 Daily average revenue trades (“DARTs”) (in thousands)3 1.Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. The prior period amount has been revised to include certain additional vested client employee stock options to align the timing of recognition with other existing Morgan Stanley client assets. 2.Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts. 3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period." }, { "status": "MODIFIED", "current_title": "Market Risk", "prior_title": "Market Risk", "similarity_score": 0.865, "confidence": "high", "key_changes": [ "Reworded sentence: \"Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio.\"" ], "current_body": "Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. We have direct exposure to market risk. In addition, market risk may also impact our clients and markets in a manner that may indirectly impact us. For more information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”", "prior_body": "Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio owned by us. For more information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”" }, { "status": "MODIFIED", "current_title": "We face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.", "prior_title": "We face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.", "similarity_score": 0.864, "confidence": "high", "key_changes": [ "Reworded sentence: \"We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, investment advisers and sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial and ancillary services in the U.S.\"", "Reworded sentence: \"For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”\"" ], "current_body": "The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, investment advisers and sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial and ancillary services in the U.S. and globally, including, in certain instances, through the internet. We also compete with companies that provide online trading and banking services, investment advisory services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price.Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies, including generative artificial intelligence, will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.Our people are our most important asset. We compete with various other companies in attracting and retaining qualified and other companies offering financial and ancillary services in the U.S. and globally, including, in certain instances, through the internet. We also compete with companies that provide online trading and banking services, investment advisory services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge. We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”", "prior_body": "The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial or ancillary services in the U.S. and globally, including through the internet. We also compete with companies that provide online trading and banking services, investment advisor services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge. We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business —Competition” and “Business—Supervision and Regulation.”Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.Our people are our most important asset. We compete with various other companies in attracting and retaining qualified and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees, or do so at levels or in forms necessary to maintain our competitive position, or if compensation costs required to attract and retain employees become more expensive, or the competitive market for talent further intensifies, our performance, including our competitive position and results of operations, could be materially adversely affected.The financial industry has experienced and may continue to experience more stringent regulation of employee compensation, including limitations relating to incentive-based compensation, clawback requirements and special taxation, which could have an adverse effect on our ability to hire or retain the most qualified employees.International RiskWe are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, cybersecurity, data transfer and outsourcing restrictions, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability, including tensions between China and the U.S. In many countries, the laws and —Competition” and “Business—Supervision and Regulation.”" }, { "status": "MODIFIED", "current_title": "Replacement or reform of certain interest rate benchmarks could adversely affect our business, securities, financial condition and results of operations.", "prior_title": "Replacement of London Interbank Offered Rate and replacement or reform of other interest rate benchmarks could adversely affect our business, financial condition and results of operations.", "similarity_score": 0.863, "confidence": "high", "key_changes": [ "Reworded sentence: \"A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms has been underway for a number of years.\"", "Reworded sentence: \"The ongoing market transition away from these interest rate benchmarks to alternative reference rates is complex and December 2023 Form 10-K22 December 2023 Form 10-K22 December 2023 Form 10-K22 22 Table of Contents Table of Contents Table of Contents could have a range of adverse impacts on our business, securities, financial condition and results of operations, including:•Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks;•Inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates;•Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and•Causing us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters.”Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so.\"", "Reworded sentence: \"In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies, including generative artificial intelligence, will likely continue the pressure on revenues.\"", "Reworded sentence: \"We compete with various other companies in attracting and retaining qualified could have a range of adverse impacts on our business, securities, financial condition and results of operations, including:•Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks;•Inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates;•Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and•Causing us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters.”Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so.\"" ], "current_body": "Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms has been underway for a number of years. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations. The ongoing market transition away from these interest rate benchmarks to alternative reference rates is complex and December 2023 Form 10-K22 December 2023 Form 10-K22 December 2023 Form 10-K22 22 Table of Contents Table of Contents Table of Contents could have a range of adverse impacts on our business, securities, financial condition and results of operations, including:•Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks;•Inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates;•Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and•Causing us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters.”Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, investment advisers and sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial and ancillary services in the U.S. and globally, including, in certain instances, through the internet. We also compete with companies that provide online trading and banking services, investment advisory services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price.Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies, including generative artificial intelligence, will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.Our people are our most important asset. We compete with various other companies in attracting and retaining qualified could have a range of adverse impacts on our business, securities, financial condition and results of operations, including:•Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks;•Inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates;•Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and•Causing us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters.”Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, investment advisers and sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms could have a range of adverse impacts on our business, securities, financial condition and results of operations, including: •Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks; •Inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates; •Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and •Causing us to incur additional costs in relation to any of the above factors. Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates. See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters.”", "prior_body": "Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and is a multi-year initiative. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations.The ongoing market transition away from IBORs and other interest rate benchmarks to alternative reference rates is complex and could have a range of adverse impacts on our business, financial condition and results of operations. In particular, such transition or reform could:•Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any IBOR-linked securities, loans and derivatives that are included in our financial assets and liabilities;•Require further extensive changes to documentation that governs or references IBOR or IBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities and related hedging transactions;•Result in a population of products with documentation that governs or references IBOR or IBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners;•Result in inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of an IBOR with one or more alternative reference rates, including regulatory guidance regarding constraints on the entry into new U.S. dollar IBOR-linked contracts after December 31, 2021;•Result in disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates;•Require the additional transition and/or further development of appropriate systems and analytics to effectively transition our risk management processes from IBORs to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and•Cause us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the interest rate benchmark reforms is underway and is a multi-year initiative. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations. The ongoing market transition away from IBORs and other interest rate benchmarks to alternative reference rates is complex and could have a range of adverse impacts on our business, financial condition and results of operations. In particular, such transition or reform could: •Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any IBOR-linked securities, loans and derivatives that are included in our financial assets and liabilities; •Require further extensive changes to documentation that governs or references IBOR or IBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities and related hedging transactions; •Result in a population of products with documentation that governs or references IBOR or IBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners; •Result in inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of an IBOR with one or more alternative reference rates, including regulatory guidance regarding constraints on the entry into new U.S. dollar IBOR-linked contracts after December 31, 2021; •Result in disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates; •Require the additional transition and/or further development of appropriate systems and analytics to effectively transition our risk management processes from IBORs to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and •Cause us to incur additional costs in relation to any of the above factors. Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the December 2022 Form 10-K18 December 2022 Form 10-K18 December 2022 Form 10-K18 18 Table of Contents Table of Contents Table of Contents timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters” herein.Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial or ancillary services in the U.S. and globally, including through the internet. We also compete with companies that provide online trading and banking services, investment advisor services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price.Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business—Competition” and “Business—Supervision and Regulation.”Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.Our people are our most important asset. We compete with various other companies in attracting and retaining qualified and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees, or do so at levels or in forms necessary to maintain our competitive position, or if compensation costs required to attract and retain employees become more expensive, or the competitive market for talent further intensifies, our performance, including our competitive position and results of operations, could be materially adversely affected.The financial industry has experienced and may continue to experience more stringent regulation of employee compensation, including limitations relating to incentive-based compensation, clawback requirements and special taxation, which could have an adverse effect on our ability to hire or retain the most qualified employees.International RiskWe are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, cybersecurity, data transfer and outsourcing restrictions, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability, including tensions between China and the U.S. In many countries, the laws and timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates.See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters” herein.Competitive EnvironmentWe face strong competition from financial services firms and others, which could lead to pricing pressures that could materially adversely affect our revenues and profitability.The financial services industry and all aspects of our businesses are intensely competitive, and we expect them to remain so. We compete with commercial banks, investment banking firms, brokerage firms, insurance companies, exchanges, electronic trading and clearing platforms, financial data repositories, sponsors of mutual funds, hedge funds, real assets funds and private credit and equity funds, energy companies, financial technology firms and other companies offering financial or ancillary services in the U.S. and globally, including through the internet. We also compete with companies that provide online trading and banking services, investment advisor services, robo-advice capabilities, access to digital asset capabilities and services, and other financial products and services. We compete on the basis of several factors, including transaction execution, capital or access to capital, products and services, innovation, technology, reputation, risk appetite and price.Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.We have experienced and may continue to experience pricing pressures as a result of these factors and as some of our competitors seek to obtain market share by reducing prices, eliminating commissions or other fees, or providing more favorable terms of business. In addition, certain of our competitors may be subject to different and, in some cases, less stringent, legal and regulatory regimes than we are, thereby putting us at a competitive disadvantage. Some new competitors in the financial technology sector have sought to target existing segments of our businesses that could be susceptible to disruption by innovative or less regulated business models. For more information regarding the competitive environment in which we operate, see “Business timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates. See also “Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Requirements—Regulatory Developments and Other Matters” herein." }, { "status": "MODIFIED", "current_title": "Lending commitments3", "prior_title": "Loans and Lending Commitments", "similarity_score": 0.856, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 FVO1\"" ], "current_body": "At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 FVO1", "prior_body": "At December 31, 2022$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management14 — 218 222 Total loans2199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142" }, { "status": "MODIFIED", "current_title": "Operations and Technology Committee of the Board", "prior_title": "Operations and Technology Committee of the Board", "similarity_score": 0.856, "confidence": "high", "key_changes": [ "Reworded sentence: \"The BOTC oversees our operations and technology strategy and significant investments in support of such strategy; oversees operational risk, including information technology, information security, fraud, third-party oversight, business disruption and resilience and cybersecurity risks and the steps management has taken to monitor and control such exposures.\"" ], "current_body": "The BOTC oversees our operations and technology strategy and significant investments in support of such strategy; oversees operational risk, including information technology, information security, fraud, third-party oversight, business disruption and resilience and cybersecurity risks and the steps management has taken to monitor and control such exposures. The BOTC reviews and approves significant operations and technology policies. The BOTC also reviews risk management and risk assessment guidelines in coordination with the Board and other Board committees, and policies regarding operational risk. The BOTC reports to the Board on a regular basis.", "prior_body": "The Operations and Technology Committee of the Board (“BOTC”) oversees our operations and technology strategy and significant investments in support of such strategy; oversees operations, technology and operational risk, including information security, fraud, vendor, data protection, privacy, business continuity and resilience, cybersecurity risks and the steps management has taken to monitor and control such exposures; and reviews risk management and risk assessment guidelines in coordination with the Board and other Board committees, and policies regarding operations, technology and operational risk. The BOTC reports to the Board on a regular basis." }, { "status": "MODIFIED", "current_title": "Regulatory Capital Requirements", "prior_title": "Regulatory Capital Requirements", "similarity_score": 0.856, "confidence": "high", "key_changes": [ "Reworded sentence: \"Capital Buffer RequirementsAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.4%5.8%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.4%8.8%5.5% At December 31, 2023 and December 31, 2022 SCB1 G-SIB capital surcharge2 CCyB3 1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.\"", "Reworded sentence: \"Risk-Based Regulatory Capital Ratio RequirementsRegulatory MinimumAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %12.9%13.3%10.0%Tier 1 capital ratio6.0 %14.4%14.8%11.5%Total capital ratio8.0 %16.4%16.8%13.5%1.Required ratios represent the regulatory minimum plus the capital buffer requirement.Risk-Weighted Assets.\"", "Reworded sentence: \"At December 31, 2023 and December 31, 2022, the differences between the actual and required ratios were lower under the Standardized Approach.Leverage-Based Regulatory Capital.\"", "Reworded sentence: \"Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period.\"" ], "current_body": "We are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein. Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.4%5.8%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.4%8.8%5.5% At December 31, 2023 and December 31, 2022 SCB1 G-SIB capital surcharge2 CCyB3 1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein. 2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein. 3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero. The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. Risk-Based Regulatory Capital Ratio RequirementsRegulatory MinimumAtDecember 31,2023 AtDecember 31,2022 At December 31, 2023 and December 31, 2022StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %12.9%13.3%10.0%Tier 1 capital ratio6.0 %14.4%14.8%11.5%Total capital ratio8.0 %16.4%16.8%13.5%1.Required ratios represent the regulatory minimum plus the capital buffer requirement.Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:•Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;•Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and•Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2023 and December 31, 2022, the differences between the actual and required ratios were lower under the Standardized Approach.Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.CECL Deferral. Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 50% from January 1, 2023. The deferral impacts will become fully phased-in beginning on January 1, 2025. buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.", "prior_body": "We are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein. Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.8%5.7%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.8%8.7%5.5% At December 31, 2022 and December 31, 2021 SCB1 G-SIB capital surcharge2 CCyB3 1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein. 2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein. 3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero. The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. December 2022 Form 10-K46 December 2022 Form 10-K46 December 2022 Form 10-K46 46 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Risk-Based Regulatory Capital Ratio RequirementsRegulatory MinimumAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %13.3%13.2%10.0%Tier 1 capital ratio6.0 %14.8%14.7%11.5%Total capital ratio8.0 %16.8%16.7%13.5%1.Required ratios represent the regulatory minimum plus the capital buffer requirement.Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:•Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;•Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and•Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2022 and December 31, 2021, the differences between the actual and required ratios were lower under the Standardized Approach.Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.CECL Deferral. As of December 31, 2021, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure were calculated excluding the effect of the adoption of CECL based on the Firm’s election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 the deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025. Regulatory Capital Ratios$ in millionsRequiredRatio1At December 31, 2022RequiredRatio1At December 31, 2021Risk-based capital— StandardizedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital77,191 83,348 Total capital86,575 93,166 Total RWA447,849 471,921 Common Equity Tier 1 capital ratio13.3 %15.3 %13.2 %16.0 %Tier 1 capital ratio14.8 %17.2 %14.7 %17.7 %Total capital ratio16.8 %19.3 %16.7 %19.7 %$ in millionsRequiredRatio1At December 31, 2022At December 31, 2021Risk-based capital—AdvancedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital 77,191 83,348 Total capital 86,159 92,927 Total RWA 438,806 435,749 Common Equity Tier 1 capital ratio10.0 %15.6 %17.4 %Tier 1 capital ratio11.5 %17.6 %19.1 %Total capital ratio13.5 %19.6 %21.3 %$ in millionsRequired Ratio1At December 31, 2022At December 31, 2021Leverage-based capitalAdjusted average assets2$1,150,772 $1,169,939 Tier 1 leverage ratio4.0 %6.7 %7.1 %Supplementary leverage exposure,3$1,399,403 $1,476,962 SLR5.0 %5.5 %5.6 %1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. Risk-Based Regulatory Capital Ratio RequirementsRegulatory MinimumAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedRequired ratios1Common Equity Tier 1 capital ratio4.5 %13.3%13.2%10.0%Tier 1 capital ratio6.0 %14.8%14.7%11.5%Total capital ratio8.0 %16.8%16.7%13.5%1.Required ratios represent the regulatory minimum plus the capital buffer requirement.Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following:•Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;•Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and•Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets).Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2022 and December 31, 2021, the differences between the actual and required ratios were lower under the Standardized Approach.Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.CECL Deferral. As of December 31, 2021, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure were calculated excluding the effect of the adoption of CECL based on the Firm’s election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 the deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025." }, { "status": "MODIFIED", "current_title": "A default by a large financial institution could adversely affect financial markets.", "prior_title": "Operational Risk", "similarity_score": 0.854, "confidence": "high", "key_changes": [ "Reworded sentence: \"The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities.\"", "Reworded sentence: \"We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third parties to operate our different businesses and process a high volume of transactions.\"", "Reworded sentence: \"Disruptions to, destruction of, instability of or other failure to effectively maintain our IT systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation.\"", "Reworded sentence: \"This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, floods, hurricanes and wildfires); electrical outages; environmental hazards; computer servers; communication platforms or other services we use; new technologies (such as generative artificial intelligence); and our employees or third parties with whom we conduct business.\"", "Reworded sentence: \"We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third parties to operate our different businesses and process a high volume of transactions.\"" ], "current_body": "The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearinghouses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions, or require December 2023 Form 10-K14 December 2023 Form 10-K14 December 2023 Form 10-K14 14 Table of Contents Table of Contents Table of Contents financial commitments to multi-lateral actions intended to support market stability. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearinghouses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”Operational RiskOperational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors (e.g., inappropriate or unlawful conduct) or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal, regulatory and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology (\"IT\") and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third parties (or third parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, or integration of processes or systems of acquired companies, resulting in new operational risk that we may not fully appreciate or identify. The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our IT systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation. As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes, or due to fraud or cyberattack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearinghouses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third party’s systems (or third parties thereof), processes or information assets, or improper or unauthorized action by third parties, including consultants and subcontractors or our employees, we have received in the past and may receive in the future regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses or damage to our reputation. In addition, the interconnectivity of multiple financial institutions with central agents, exchanges and clearinghouses, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industrywide operational failure that could materially impact our ability to conduct business. Furthermore, the concentration of Firm and personal information held by a small number of third parties increases the risk that a breach or disruption at a key third party may cause an industrywide event that could significantly increase the cost and risk of conducting business. These risks may be heightened to the extent that we rely on third parties that are concentrated in a geographic area.There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities where we are located. This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, floods, hurricanes and wildfires); electrical outages; environmental hazards; computer servers; communication platforms or other services we use; new technologies (such as generative artificial intelligence); and our employees or third parties with whom we conduct business. Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business.Notwithstanding evolving technology and technology-based risk and control systems, our businesses ultimately rely on people, including our employees and those of third parties with whom we conduct business. As a result of human error or engagement in violations of applicable policies, laws, rules or procedures, certain errors or violations are not always discovered immediately by our technological processes or by financial commitments to multi-lateral actions intended to support market stability. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearinghouses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”Operational RiskOperational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors (e.g., inappropriate or unlawful conduct) or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal, regulatory and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology (\"IT\") and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third parties (or third parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, or integration of processes or systems of acquired companies, resulting in new operational risk that we may not fully appreciate or identify. The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our IT systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation. financial commitments to multi-lateral actions intended to support market stability. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearinghouses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”", "prior_body": "Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyber-attacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of December 2022 Form 10-K10 December 2022 Form 10-K10 December 2022 Form 10-K10 10 Table of Contents Table of Contents Table of Contents our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third-parties (or third-parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, or integration of processes or systems of acquired companies, resulting in new operational risk that we may not fully appreciate or identify. The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third-parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our information technology systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation. As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes or due to fraud or cyber-attack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third-party’s systems (or third-parties thereof), processes or information assets, or improper or unauthorized action by third-parties, including consultants and subcontractors or our employees, we have in the past and may receive regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses, or damage to our reputation. In addition, the interconnectivity of multiple financial institutions with central agents, exchanges and clearing houses, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could materially impact our ability to conduct business. Furthermore, the concentration of Firm and personal information held by a handful of third-parties increases the risk that a breach at a key third-party may cause an industry-wide event that could significantly increase the cost and risk of conducting business.There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities where we are located. This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, hurricanes and wildfires); electrical outages; environmental hazards; computer servers; communication platforms or other services we use; and our employees or third-parties with whom we conduct business. Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business.Notwithstanding evolving technology and technology-based risk and control systems, our businesses ultimately rely on people, including our employees and those of third-parties with which we conduct business. As a result of human error or engagement in violations of applicable policies, laws, rules or procedures, certain errors or violations are not always discovered immediately by our technological processes or by our controls and other procedures, which are intended to prevent and detect such errors or violations. These can include calculation or input errors, inadvertent or duplicate payments, mistakes in addressing emails or other communications, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us.We conduct business in various jurisdictions outside the U.S., including jurisdictions that may not have comparable levels of protection for their corporate assets such as intellectual property, trademarks, trade secrets, know-how, and customer information and records. The protection afforded in those jurisdictions may be less established and/or predictable than in the U.S. or other jurisdictions in which we operate. As a result, there may also be heightened risks associated with the potential theft of their data, technology and intellectual property in those jurisdictions by domestic or foreign actors, our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third-parties (or third-parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, or integration of processes or systems of acquired companies, resulting in new operational risk that we may not fully appreciate or identify. The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third-parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our information technology systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation. As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes or due to fraud or cyber-attack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third-party’s systems (or third-parties thereof), processes or information assets, or improper or unauthorized action by third-parties, including consultants and subcontractors or our employees, we have in the past and may receive regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses, or damage to our reputation. our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under “Legal, Regulatory and Compliance Risk.” For more information on how we monitor and manage operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk.”" }, { "status": "MODIFIED", "current_title": "Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.", "prior_title": "Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.", "similarity_score": 0.854, "confidence": "high", "key_changes": [ "Reworded sentence: \"The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, droughts, and wildfires and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts.\"", "Reworded sentence: \"Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and varies in quality.\"", "Reworded sentence: \"These and other factors could cause results to differ materially, which could impact our ability to manage climate-related risks.Replacement or reform of certain interest rate benchmarks could adversely affect our business, securities, financial condition and results of operations.Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”).\"", "Reworded sentence: \"Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and varies in quality.\"", "Reworded sentence: \"These and other factors could cause results to differ materially, which could impact our ability to manage climate-related risks.\"" ], "current_body": "There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, droughts, and wildfires and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts. Such events could disrupt our operations or those of our clients or third parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. These events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, increase costs, including the cost or availability of insurance coverage, and result in other adverse effects. The transition risks of climate change include policy, legal, technology and market changes. Examples of these transition risks include changes in consumer and business sentiment, related technologies, shareholder preferences and any additional regulatory and legislative requirements, including increased disclosure or carbon taxes. These risks could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Negative impacts to certain of our clients, such as decreased profitability and asset write-downs, could also lead to increased credit, counterparty and liquidity risk to us. In addition, our reputation and client relationships may be adversely impacted as a result of our, or our clients’, involvement in certain practices that may have, or are associated with having, an adverse impact on climate change. Legislative or regulatory change regarding climate-related risks, including inconsistent requirements and uncertainties, could result in loss of revenue, or increased credit, market, liquidity, regulatory, compliance, reputational and other risks and costs. Our ability to achieve our climate-related targets and commitments and the way we go about this could also result in reputational harm as a result of public sentiment, legislative and regulatory scrutiny (including from U.S. federal and state governments and foreign policymakers and regulators), litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, or the way we respond is perceived negatively, our business and reputation may suffer.The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change, as well as geopolitical events, continue to evolve rapidly, making it difficult to assess the ultimate impact on us of climate-related risks and uncertainties. As climate risk is interconnected with other risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management practices and governance structures. Despite our risk management practices, the unpredictability surrounding the timing and severity of climate-related events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and mitigate climate risks.In addition, the methodologies and data used to manage and monitor climate risk continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and varies in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other factors could cause results to differ materially, which could impact our ability to manage climate-related risks.Replacement or reform of certain interest rate benchmarks could adversely affect our business, securities, financial condition and results of operations.Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms has been underway for a number of years. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations.The ongoing market transition away from these interest rate benchmarks to alternative reference rates is complex and in reputational harm as a result of public sentiment, legislative and regulatory scrutiny (including from U.S. federal and state governments and foreign policymakers and regulators), litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, or the way we respond is perceived negatively, our business and reputation may suffer. The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change, as well as geopolitical events, continue to evolve rapidly, making it difficult to assess the ultimate impact on us of climate-related risks and uncertainties. As climate risk is interconnected with other risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management practices and governance structures. Despite our risk management practices, the unpredictability surrounding the timing and severity of climate-related events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and mitigate climate risks. In addition, the methodologies and data used to manage and monitor climate risk continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and varies in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other factors could cause results to differ materially, which could impact our ability to manage climate-related risks.", "prior_body": "There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, wildfires, and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels, and droughts. Such events could disrupt our operations or those of our clients or third-parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. Over the longer term, these events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, limit insurance coverage and result in other effects. Additionally, transitioning to a low-carbon economy will likely require extensive policy, legal, technology and market changes. Transition risks, including changes in consumer and business sentiment, related technologies, shareholder preferences, and any additional regulatory and legislative requirements, including carbon taxes, could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Over the longer term, negative impacts to certain of our clients, such as decreased profitability and stranded assets, could also lead to increased credit and counterparty risk to us. In addition, our reputation and client relationships may be adversely impacted as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries, projects, or initiatives associated with causing, or potentially slowing solutions to, climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. Legislative or 17December 2022 Form 10-K 17December 2022 Form 10-K 17December 2022 Form 10-K 17 Table of Contents Table of Contents Table of Contents regulatory uncertainties and change regarding climate-related risks, including inconsistent perspectives or requirements, are likely to result in higher regulatory, compliance, credit, reputational and other risks and costs.Our ability to achieve our long-term climate-related goals and commitments could also result in reputational harm as a result of public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, our business and reputation may suffer.The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change are continuing to evolve rapidly, which can make it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties. As climate risk is interconnected with other risk types, including geopolitical risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies for risks such as market, credit and operational risks, as well as our governance structures. Despite our risk management strategies, the unpredictability surrounding the timing and severity of climate change events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and effectively mitigate climate risk exposure.In addition, the methodologies and data used to manage and monitor climate risk are still in early stages and continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and variable in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other 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.Replacement of London Interbank Offered Rate and replacement or reform of other interest rate benchmarks could adversely affect our business, financial condition and results of operations.Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and is a multi-year initiative. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations.The ongoing market transition away from IBORs and other interest rate benchmarks to alternative reference rates is complex and could have a range of adverse impacts on our business, financial condition and results of operations. In particular, such transition or reform could:•Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any IBOR-linked securities, loans and derivatives that are included in our financial assets and liabilities;•Require further extensive changes to documentation that governs or references IBOR or IBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities and related hedging transactions;•Result in a population of products with documentation that governs or references IBOR or IBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners;•Result in inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of an IBOR with one or more alternative reference rates, including regulatory guidance regarding constraints on the entry into new U.S. dollar IBOR-linked contracts after December 31, 2021;•Result in disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates;•Require the additional transition and/or further development of appropriate systems and analytics to effectively transition our risk management processes from IBORs to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and•Cause us to incur additional costs in relation to any of the above factors.Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the regulatory uncertainties and change regarding climate-related risks, including inconsistent perspectives or requirements, are likely to result in higher regulatory, compliance, credit, reputational and other risks and costs.Our ability to achieve our long-term climate-related goals and commitments could also result in reputational harm as a result of public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, our business and reputation may suffer.The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change are continuing to evolve rapidly, which can make it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties. As climate risk is interconnected with other risk types, including geopolitical risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies for risks such as market, credit and operational risks, as well as our governance structures. Despite our risk management strategies, the unpredictability surrounding the timing and severity of climate change events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and effectively mitigate climate risk exposure.In addition, the methodologies and data used to manage and monitor climate risk are still in early stages and continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and variable in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other 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.Replacement of London Interbank Offered Rate and replacement or reform of other interest rate benchmarks could adversely affect our business, financial condition and results of operations.Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential regulatory uncertainties and change regarding climate-related risks, including inconsistent perspectives or requirements, are likely to result in higher regulatory, compliance, credit, reputational and other risks and costs. Our ability to achieve our long-term climate-related goals and commitments could also result in reputational harm as a result of public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, our business and reputation may suffer. The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change are continuing to evolve rapidly, which can make it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties. As climate risk is interconnected with other risk types, including geopolitical risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies for risks such as market, credit and operational risks, as well as our governance structures. Despite our risk management strategies, the unpredictability surrounding the timing and severity of climate change events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and effectively mitigate climate risk exposure. In addition, the methodologies and data used to manage and monitor climate risk are still in early stages and continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and variable in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other 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." }, { "status": "MODIFIED", "current_title": "We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements.", "prior_title": "We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements.", "similarity_score": 0.854, "confidence": "high", "key_changes": [ "Reworded sentence: \"We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take.\"", "Reworded sentence: \"For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business.\"" ], "current_body": "We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve. In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry. Certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas, deferred prosecution agreements or non-prosecution agreements from financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, reputation, financial condition or results of operations, and increase our exposure to civil litigation.Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions or other relief, and have included and may in the future include requirements that the Firm admit certain conduct, which may result in increased exposure to civil litigation. In addition, these measures have caused and may in the future cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses.As part of the resolution of certain investigations and proceedings, the Firm has been and may in the future be required to undertake certain measures and failure to do so may result in adverse consequences, such as further investigations or proceedings—both civil and criminal—and additional penalties, fines, judgments or other relief.The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC.We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages, or may result in material penalties, fines or other results adverse to us.In some cases, the third-party entities that would otherwise be the primary defendants in such cases are bankrupt, in financial distress or may not honor applicable indemnification", "prior_body": "We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed 15December 2022 Form 10-K 15December 2022 Form 10-K 15December 2022 Form 10-K 15 Table of Contents Table of Contents Table of Contents dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve.In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In addition to the monetary consequences, these measures could cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses.These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry, and certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas or deferred prosecution agreements from, financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, financial condition or results of operations or cause us significant reputational harm, which could seriously harm our business.The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC.We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages, claims for indeterminate amounts of damages, or may result in material penalties, fines, or other results adverse to us.In some cases, the issuers that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. In other cases, including antitrust litigation, we may be subject to claims for joint and several liability with other defendants for treble damages or other relief related to alleged conspiracies involving other institutions. Like any large corporation, we are also subject to risk from potential employee misconduct, including non-compliance with policies, laws, rules and regulations, and improper use or disclosure of confidential information, or improper sales practices or other conduct.We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 15 to the financial statements.A failure to address conflicts of interest appropriately could adversely affect our businesses and reputation.As a global financial services firm that provides products and services to a large and diversified group of clients, including corporations, governments, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple brands and business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information.We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. Indeed, actions that merely appear to dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve.In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In addition to the monetary consequences, these measures could cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses.These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry, and certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas or deferred prosecution agreements from, financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, financial condition or results of operations or cause us significant reputational harm, which could seriously harm our business.The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC.We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages, claims for indeterminate amounts of damages, or dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve. In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein." }, { "status": "MODIFIED", "current_title": "Average Fee Rates1", "prior_title": "Average Fee Rates1", "similarity_score": 0.848, "confidence": "high", "key_changes": [ "Reworded sentence: \"Fee rate in bps202320222021Separately managed12 12 14 Unified managed92 94 95 Advisor80 81 82 Portfolio manager91 92 93 Subtotal65 66 72 Cash management6 6 5 Total fee-based client assets64 65 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets.\"", "Reworded sentence: \"•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account.\"", "Reworded sentence: \"•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.\"", "Reworded sentence: \"Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments.\"" ], "current_body": "Fee rate in bps202320222021Separately managed12 12 14 Unified managed92 94 95 Advisor80 81 82 Portfolio manager91 92 93 Subtotal65 66 72 Cash management6 6 5 Total fee-based client assets64 65 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets. Asset management revenues within the Wealth Management segment are primarily generated from the following types of accounts: •Separately managed—accounts by which third party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset December 2023 Form 10-K40 December 2023 Form 10-K40 December 2023 Form 10-K40 40 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents manager. Only one third-party asset manager strategy can be held per account.•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. manager. Only one third-party asset manager strategy can be held per account.•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. manager. Only one third-party asset manager strategy can be held per account. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client. •Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments. •Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change. •Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. 41December 2023 Form 10-K 41December 2023 Form 10-K 41December 2023 Form 10-K 41 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Investment ManagementIncome Statement Information % Change$ in millions20232022202120232022RevenuesAsset management and related fees$5,231 $5,332 $5,576 (2)%(4)%Performance-based income and other1139 43 644 N/M(93)%Net revenues5,370 5,375 6,220 — %(14)%Compensation and benefits2,217 2,273 2,373 (2)%(4)%Non-compensation expenses2,311 2,295 2,169 1 %6 %Total non-interest expenses4,528 4,568 4,542 (1)%1 %Income before provision for income taxes842 807 1,678 4 %(52)%Provision for income taxes199 162 356 23 %(54)%Net income643 645 1,322 — %(51)%Net income applicable to noncontrolling interests4 (15)(25)127 %40 %Net income applicable to Morgan Stanley$639 $660 $1,347 (3)%(51)%1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows.Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. The market environment and client preferences in recent quarters have impacted the mix of our average Long-Term AUM level across certain asset classes. To the extent these conditions continue, we would expect our Asset management revenue to continue to be negatively impacted.See “Assets Under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues increased to $139 million in 2023, from $43 million in the prior year, primarily due to mark-to-market gains in 2023 compared with losses in the prior year on DCP investments and investments in public funds, partially offset by lower accrued carried interest in certain private funds. Non-Interest ExpensesNon-interest expenses of $4,528 million in 2023 decreased 1% from the prior year, primarily due to lower Compensation and benefits expenses. •Compensation and benefits expenses decreased primarily due to lower expenses related to compensation associated with carried interest, partially offset by higher expenses related to DCP.•Non-compensation expenses were relatively unchanged for the current year. Investment ManagementIncome Statement Information % Change$ in millions20232022202120232022RevenuesAsset management and related fees$5,231 $5,332 $5,576 (2)%(4)%Performance-based income and other1139 43 644 N/M(93)%Net revenues5,370 5,375 6,220 — %(14)%Compensation and benefits2,217 2,273 2,373 (2)%(4)%Non-compensation expenses2,311 2,295 2,169 1 %6 %Total non-interest expenses4,528 4,568 4,542 (1)%1 %Income before provision for income taxes842 807 1,678 4 %(52)%Provision for income taxes199 162 356 23 %(54)%Net income643 645 1,322 — %(51)%Net income applicable to noncontrolling interests4 (15)(25)127 %40 %Net income applicable to Morgan Stanley$639 $660 $1,347 (3)%(51)%1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.", "prior_body": "Fee rate in bps202220212020Separately managed12 14 14 Unified managed94 95 99 Advisor81 82 85 Portfolio manager92 93 94 Subtotal66 72 73 Cash management6 5 5 Total fee-based client assets65 70 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets. •Inflows—include new accounts, account transfers, deposits, dividends and interest. •Outflows—include closed or terminated accounts, account transfers, withdrawals and client fees. •Market impact—includes realized and unrealized gains and losses on portfolio investments. •Separately managed—accounts by which third-party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset manager. Only one third-party asset manager strategy can be held per account. 33December 2022 Form 10-K 33December 2022 Form 10-K 33December 2022 Form 10-K 33 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client. •Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments. •Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change. •Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. December 2022 Form 10-K34 December 2022 Form 10-K34 December 2022 Form 10-K34 34 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Investment ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management and related fees$5,332 $5,576 $3,013 (4)%85 %Performance-based income and other143 644 721 (93)%(11)%Net revenues5,375 6,220 3,734 (14)%67 %Compensation and benefits2,273 2,373 1,542 (4)%54 %Non-compensation expenses2,295 2,169 1,322 6 %64 %Total non-interest expenses4,568 4,542 2,864 1 %59 %Income before provision for income taxes807 1,678 870 (52)%93 %Provision for income taxes162 356 171 (54)%108 %Net income645 1,322 699 (51)%89 %Net income applicable to noncontrolling interests(15)(25)84 40 %(130)%Net income applicable to Morgan Stanley$660 $1,347 $615 (51)%119 %1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Acquisition of Eaton VanceThe comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements.Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,332 million in 2022 decreased 4% compared with the prior year, reflecting the impact of the decline in the equity markets, partially offset by incremental revenues as a result of the Eaton Vance acquisition and the impact of lower fee waivers in certain money market funds. Asset management revenues are influenced by the level and relative mix of AUM and related fee rates. The current market environment may impact AUM and net flows within asset classes and therefore our asset management revenues.See “Assets under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues were $43 million in 2022, representing a 93% decrease from the prior year, primarily due to lower accrued carried interest in certain private equity and real estate funds, losses on investments associated with certain employee deferred cash-based compensation plans, and mark-to-market losses on public investments. Non-interest ExpensesNon-interest expenses of $4,568 million in 2022 were relatively unchanged from the prior year period, reflecting higher Non-compensation expenses offset by lower Compensation and benefits.•Compensation and benefits expenses decreased primarily due to lower discretionary incentive compensation driven by lower asset management revenues and lower compensation associated with carried interest, partially offset by the impact of incremental compensation as a result of the Eaton Vance acquisition.•Non-compensation expenses increased primarily due to higher marketing and business development costs and incremental expenses as a result of the Eaton Vance acquisition. Investment ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management and related fees$5,332 $5,576 $3,013 (4)%85 %Performance-based income and other143 644 721 (93)%(11)%Net revenues5,375 6,220 3,734 (14)%67 %Compensation and benefits2,273 2,373 1,542 (4)%54 %Non-compensation expenses2,295 2,169 1,322 6 %64 %Total non-interest expenses4,568 4,542 2,864 1 %59 %Income before provision for income taxes807 1,678 870 (52)%93 %Provision for income taxes162 356 171 (54)%108 %Net income645 1,322 699 (51)%89 %Net income applicable to noncontrolling interests(15)(25)84 40 %(130)%Net income applicable to Morgan Stanley$660 $1,347 $615 (51)%119 %1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Acquisition of Eaton VanceThe comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements." }, { "status": "MODIFIED", "current_title": "Funding Management", "prior_title": "Funding Management", "similarity_score": 0.848, "confidence": "high", "key_changes": [ "Reworded sentence: \"These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit.\"", "Added sentence: \"Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded.\"", "Added sentence: \"Treasury similarly allocates interest income to businesses carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.\"" ], "current_body": "We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing. We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies. Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded. Treasury similarly allocates interest income to businesses carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.", "prior_body": "We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing. We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies." }, { "status": "MODIFIED", "current_title": "Our risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.", "prior_title": "Our risk management strategies, models and processes may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk, which could result in unexpected losses.", "similarity_score": 0.845, "confidence": "high", "key_changes": [ "Reworded sentence: \"As our businesses change and grow, including through acquisitions and the introduction and application of new technologies, such as artificial intelligence, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes.\"", "Reworded sentence: \"Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.\"", "Reworded sentence: \"The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, droughts, and wildfires and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts.\"" ], "current_body": "We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. As our businesses change and grow, including through acquisitions and the introduction and application of new technologies, such as artificial intelligence, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate. In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses. Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot 21December 2023 Form 10-K 21December 2023 Form 10-K 21December 2023 Form 10-K 21 Table of Contents Table of Contents Table of Contents anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, droughts, and wildfires and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts. Such events could disrupt our operations or those of our clients or third parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. These events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, increase costs, including the cost or availability of insurance coverage, and result in other adverse effects.The transition risks of climate change include policy, legal, technology and market changes. Examples of these transition risks include changes in consumer and business sentiment, related technologies, shareholder preferences and any additional regulatory and legislative requirements, including increased disclosure or carbon taxes. These risks could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Negative impacts to certain of our clients, such as decreased profitability and asset write-downs, could also lead to increased credit, counterparty and liquidity risk to us.In addition, our reputation and client relationships may be adversely impacted as a result of our, or our clients’, involvement in certain practices that may have, or are associated with having, an adverse impact on climate change. Legislative or regulatory change regarding climate-related risks, including inconsistent requirements and uncertainties, could result in loss of revenue, or increased credit, market, liquidity, regulatory, compliance, reputational and other risks and costs.Our ability to achieve our climate-related targets and commitments and the way we go about this could also result in reputational harm as a result of public sentiment, legislative and regulatory scrutiny (including from U.S. federal and state governments and foreign policymakers and regulators), litigation and reduced investor and stakeholder confidence. If we are unable to achieve our objectives relating to climate change or our current response to climate change is perceived to be ineffective or insufficient, or the way we respond is perceived negatively, our business and reputation may suffer.The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change, as well as geopolitical events, continue to evolve rapidly, making it difficult to assess the ultimate impact on us of climate-related risks and uncertainties. As climate risk is interconnected with other risks, we have developed and continue to enhance processes to embed climate risk considerations into our risk management practices and governance structures. Despite our risk management practices, the unpredictability surrounding the timing and severity of climate-related events and societal or political changes in reaction to them make it difficult to predict, identify, monitor and mitigate climate risks.In addition, the methodologies and data used to manage and monitor climate risk continue to evolve. Current approaches utilize information and estimates that have been derived from information or factors released by third-party sources, which may not reflect the latest or most accurate data. Climate-related data, particularly greenhouse gas emissions for clients and counterparties, remains limited in availability and varies in quality. Certain third-party information may also change over time as methodologies evolve and are refined. While we believe this information is the best available at the time, we may only be able to complete limited validation. Furthermore, modeling capabilities and methodologies to analyze climate-related risks, although improving, remain nascent and emerging. These and other factors could cause results to differ materially, which could impact our ability to manage climate-related risks.Replacement or reform of certain interest rate benchmarks could adversely affect our business, securities, financial condition and results of operations.Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms has been underway for a number of years. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations.The ongoing market transition away from these interest rate benchmarks to alternative reference rates is complex and anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, droughts, and wildfires and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts. Such events could disrupt our operations or those of our clients or third parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. These events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, increase costs, including the cost or availability of insurance coverage, and result in other adverse effects.The transition risks of climate change include policy, legal, technology and market changes. Examples of these transition risks include changes in consumer and business sentiment, related technologies, shareholder preferences and any additional regulatory and legislative requirements, including increased disclosure or carbon taxes. These risks could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Negative impacts to certain of our clients, such as decreased profitability and asset write-downs, could also lead to increased credit, counterparty and liquidity risk to us.In addition, our reputation and client relationships may be adversely impacted as a result of our, or our clients’, involvement in certain practices that may have, or are associated with having, an adverse impact on climate change. Legislative or regulatory change regarding climate-related risks, including inconsistent requirements and uncertainties, could result in loss of revenue, or increased credit, market, liquidity, regulatory, compliance, reputational and other risks and costs.Our ability to achieve our climate-related targets and commitments and the way we go about this could also result anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”", "prior_body": "We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and hedging strategies, stress testing and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. As our businesses change and grow, including through acquisitions, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate. In addition, many models we use are based on assumptions or inputs regarding correlations among prices of various asset classes or other market indicators and, therefore, cannot anticipate sudden, unanticipated, or unidentified market or economic movements, such as the impact of a pandemic or a sudden geopolitical conflict, which could cause us to incur losses. Management of market, credit, liquidity, operational, model, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Our trading risk management strategies and techniques also seek to balance our ability to profit from trading positions with our exposure to potential losses.While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”Climate change manifesting as physical or transition risks could result in increased costs and risks and adversely affect our operations, businesses and clients.There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include harm to people and property arising from acute, climate-related events, such as floods, hurricanes, heatwaves, wildfires, and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels, and droughts. Such events could disrupt our operations or those of our clients or third-parties on which we rely, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. Over the longer term, these events could impact the ability of certain of our clients or customers to repay their obligations, reduce the value of collateral, limit insurance coverage and result in other effects.Additionally, transitioning to a low-carbon economy will likely require extensive policy, legal, technology and market changes. Transition risks, including changes in consumer and business sentiment, related technologies, shareholder preferences, and any additional regulatory and legislative requirements, including carbon taxes, could increase our expenses and adversely impact our strategies, including by limiting our ability to pursue certain business activities or offer certain products and services. Over the longer term, negative impacts to certain of our clients, such as decreased profitability and stranded assets, could also lead to increased credit and counterparty risk to us.In addition, our reputation and client relationships may be adversely impacted as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries, projects, or initiatives associated with causing, or potentially slowing solutions to, climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. Legislative or our ability to profit from trading positions with our exposure to potential losses. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. For example, to the extent that our trading or investing activities involve less liquid trading markets or are otherwise subject to restrictions on sales or hedging, we may not be able to reduce our positions and, therefore, reduce our risk associated with such positions. We may, therefore, incur losses in the course of our trading or investing activities. For more information on how we monitor and manage market and certain other risks and related strategies, models and processes, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”" }, { "status": "MODIFIED", "current_title": "Net Interest", "prior_title": "Net Interest", "similarity_score": 0.843, "confidence": "high", "key_changes": [ "Reworded sentence: \"Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense.\"", "Removed sentence: \"Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income.OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other revenues directly attributable to those businesses.\"", "Removed sentence: \"These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing.\"", "Removed sentence: \"We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps.\"", "Removed sentence: \"Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities lending products, activity, and the prevailing level, term structure and volatility of interest rates.\"" ], "current_body": "Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Other Other revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments. Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.", "prior_body": "Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income.OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities lending products, activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income. Other Other revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments. Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues." }, { "status": "MODIFIED", "current_title": "Average Common Equity Attribution under the Required Capital Framework1", "prior_title": "Average Common Equity Attribution under the Required Capital Framework1", "similarity_score": 0.835, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in billions202320222021Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management210.4 10.6 8.8 Parent6.0 3.5 16.2 Total$90.8 $93.9 $97.1 Wealth Management Investment Management2 1.The attribution of average common equity to the business segments is a non-GAAP financial measure.\"", "Removed sentence: \"2.The total average common equity and the allocation to the Wealth Management business segment in 2022 and 2021 reflect the E*TRADE acquisition on October 2, 2020.\"" ], "current_body": "$ in billions202320222021Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management210.4 10.6 8.8 Parent6.0 3.5 16.2 Total$90.8 $93.9 $97.1 Wealth Management Investment Management2 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021. We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate.", "prior_body": "$ in billions202220212020Institutional Securities$48.8 $43.5 $42.8 Wealth Management231.0 28.6 20.8 Investment Management310.6 8.8 2.6 Parent3.5 16.2 14.0 Total$93.9 $97.1 $80.2 Wealth Management2 Investment Management3 1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 2.The total average common equity and the allocation to the Wealth Management business segment in 2022 and 2021 reflect the E*TRADE acquisition on October 2, 2020. 3. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021. We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate." }, { "status": "MODIFIED", "current_title": "Amounts Recognized in Compensation Expense", "prior_title": "Amounts Recognized in Compensation Expense", "similarity_score": 0.825, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in millions202320222021Deferred cash-based awards$693 $761 $810 Return on referenced investments668 (716)526 Total recognized in compensation expense$1,361 $45 $1,336\"" ], "current_body": "$ in millions202320222021Deferred cash-based awards$693 $761 $810 Return on referenced investments668 (716)526 Total recognized in compensation expense$1,361 $45 $1,336", "prior_body": "$ in millions202220212020Deferred cash-based awards$761 $810 $1,263 Return on referenced investments(716)526 856 Total recognized in compensation expense$45 $1,336 $2,119" }, { "status": "MODIFIED", "current_title": "Investment Banking", "prior_title": "Investment Banking", "similarity_score": 0.819, "confidence": "high", "key_changes": [ "Reworded sentence: \"Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to DCP.\"", "Reworded sentence: \"Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments.\"", "Reworded sentence: \"Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments.\"" ], "current_body": "Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital. Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to DCP. Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to:•taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time;•building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants;•managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks;•trading in the market to remain current on pricing and trends; and•engaging in other activities to provide efficiency and liquidity for markets.In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments. Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings. Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities. Trading Trading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to DCP. Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to: •taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time; •building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants; •managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks; •trading in the market to remain current on pricing and trends; and •engaging in other activities to provide efficiency and liquidity for markets. In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value. Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments. 33December 2023 Form 10-K 33December 2023 Form 10-K 33December 2023 Form 10-K 33 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents InvestmentsInvestments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions.Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions.Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, we consolidate certain sponsored Investment Management funds where revenues are primarily attributable to holders of noncontrolling interests. Commissions and Fees Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to securities, services related to sales and trading activities, and sales of other products. Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives. Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, alternative investments, futures and options. Wealth Management also earns revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution. Asset ManagementAsset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested.Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis. Net InterestInterest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other InvestmentsInvestments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions.Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions.Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, we consolidate certain sponsored Investment Management funds where revenues are primarily attributable to holders of noncontrolling interests. Commissions and Fees Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to securities, services related to sales and trading activities, and sales of other products. Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives. Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, alternative investments, futures and options. Wealth Management also earns revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution. Asset ManagementAsset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested.", "prior_body": "Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital. Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings. Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities. Trading Trading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to certain employee deferred compensation plans. Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to:•taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time;•building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants;•managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks;•trading in the market to remain current on pricing and trends; and•engaging in other activities to provide efficiency and liquidity for markets.In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to investments associated with certain employee deferred compensation plans.InvestmentsInvestments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions.Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions.Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to: •taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time; •building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants; •managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks; •trading in the market to remain current on pricing and trends; and •engaging in other activities to provide efficiency and liquidity for markets. In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value. Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to investments associated with certain employee deferred compensation plans." }, { "status": "MODIFIED", "current_title": "Non-Trading Risks", "prior_title": "Non-Trading Risks", "similarity_score": 0.818, "confidence": "high", "key_changes": [ "Reworded sentence: \"Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk.\"", "Reworded sentence: \"Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios.\"" ], "current_body": "We believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio. Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.Wealth Management Net Interest Income Sensitivity Analysis$ in millionsAtDecember 31,2023 AtDecember 31,2022 Basis point change+100$585 $643 -100(609)(745)The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity, including deposit forecasts as a key assumption.We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios. The level of interest rates may impact the amount of deposits held at the Firm, given competition for deposits from other institutions and alternative cash-equivalent products available to depositors. Further, rising interest rates could also impact client demand for loans. Net interest income sensitivity to interest rates at December 31, 2023 decreased from December 31, 2022, primarily driven by the effects of changes in the mix of our assets and liabilities.", "prior_body": "We believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio. Credit Spread Risk Sensitivity1$ in millionsAtDecember 31,2022 AtDecember 31,2021 Derivatives$7 $7 Borrowings carried at fair value39 48 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2022 decreased from December 31, 2021 primarily due to widening credit spreads, partially offset by new debt issuance.The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Historically, net interest income sensitivity for our U.S. Bank Subsidiaries was representative of such sensitivity for the Wealth Management business segment and, accordingly, we presented net interest income sensitivity for our U.S. Bank Subsidiaries. However, over time the Wealth Management business segment has grown its assets that generate net interest income outside of the U.S. Bank Subsidiaries, such as margin and other lending on non-bank entities, and this growth has been further accelerated by the acquisition of E*TRADE. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.Wealth Management Net Interest Income Sensitivity Analysis1$ in millionsAtDecember 31,2022 AtDecember 31,2021 Basis point change+100$643 $1,648 -100(745)(1,023)1.The prior period has been revised to conform to the current period presentation.The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity.We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment to optimize across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Net interest income sensitivity to interest rates at December" }, { "status": "MODIFIED", "current_title": "Investments Sensitivity, Including Related Carried Interest", "prior_title": "Investments Sensitivity, Including Related Carried Interest", "similarity_score": 0.818, "confidence": "high", "key_changes": [ "Reworded sentence: \"Loss from 10% Decline$ in millionsAtDecember 31,2023 AtDecember 31,2022 Investments related to Investment Management activities$481 $431 Other investments:MUMSS134 143 Other Firm investments399 378 Investments related to Investment Management activities We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets.\"", "Removed sentence: \"Investments sensitivity changed between December 31, 2022 and December 31, 2021 with an increase in sensitivity in Other Firm investments primarily due to new investments in Community Reinvestment Act affordable housing, as well as lower sensitivity in MUMSS driven by Yen depreciation.\"" ], "current_body": "Loss from 10% Decline$ in millionsAtDecember 31,2023 AtDecember 31,2022 Investments related to Investment Management activities$481 $431 Other investments:MUMSS134 143 Other Firm investments399 378 Investments related to Investment Management activities We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.", "prior_body": "Loss from 10% Decline$ in millionsAtDecember 31,2022 AtDecember 31,2021 Investments related to Investment Management activities$431 $407 Other investments:MUMSS143 167 Other Firm investments378 331 Investments related to Investment Management activities We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable. Investments sensitivity changed between December 31, 2022 and December 31, 2021 with an increase in sensitivity in Other Firm investments primarily due to new investments in Community Reinvestment Act affordable housing, as well as lower sensitivity in MUMSS driven by Yen depreciation." }, { "status": "MODIFIED", "current_title": "Risk Management Process", "prior_title": "Market Risk", "similarity_score": 0.799, "confidence": "high", "key_changes": [ "Reworded sentence: \"In subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments.\"", "Reworded sentence: \"Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures), by measures of position size and sensitivity, and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units.\"" ], "current_body": "In subsequent sections, we discuss our risk management policies and procedures for our primary risks involved in the activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.Market RiskMarket risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest rate risk) from lending and deposit-taking activities. The Investment Management business segment primarily incurs non-trading market risk from capital investments in its funds. Market risk also includes non-trading interest rate risk. Non-trading interest rate risk in the banking book (amounts classified for regulatory capital purposes under the banking book regime) refers to the exposure that a change in interest rates will result in prospective earnings changes for assets and liabilities in the banking book.Sound market risk management is an integral part of our culture. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. The control groups help ensure that these risks are measured and closely monitored and are made transparent to senior management. The Market Risk Department is responsible for ensuring the transparency of material market risks, monitoring compliance with established limits and escalating risk concentrations to appropriate senior management.To execute these responsibilities, the Market Risk Department monitors our risk against limits on aggregate risk exposures, performs a variety of risk analyses, routinely reports risk summaries, and maintains our VaR and scenario analysis systems. Market risk is also monitored through various measures: by use of statistics (including VaR and related analytical measures), by measures of position size and sensitivity, and through routine stress testing, which measures the impact on the value of existing portfolios of specified changes in market factors and scenarios designed by the Market Risk Department in collaboration with the business units. The material risks identified by these processes are summarized in reports produced by the Market Risk activities of our Institutional Securities, Wealth Management and Investment Management business segments. These sections and the estimated amounts of our risk exposure generated by our statistical analyses are forward-looking statements. However, the analyses used to assess such risks are not predictions of future events, and actual results may vary significantly from such analyses due to events in the markets in which we operate and certain other factors described in the following paragraphs.", "prior_body": "Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio owned by us. For more information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk.”" }, { "status": "MODIFIED", "current_title": "Our results of operations may be materially affected by market fluctuations and by global financial market and economic conditions and other factors.", "prior_title": "Our results of operations may be materially affected by market fluctuations and by global financial market and economic conditions and other factors.", "similarity_score": 0.797, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our results of operations have been in the past and may, in the future, be materially affected by global financial market and economic conditions, including in particular by periods of low or slowing economic growth in the United States and other major markets, both directly and indirectly through their impact on client activity levels.\"", "Reworded sentence: \"Fluctuations also occur due to the level of global market activity, which, among other things, can be impacted by market uncertainty or lack of investor and client confidence due to unforeseen economic, geopolitical or market conditions that in turn affect the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments.Periods of unfavorable market or economic conditions, including equity market levels and the level and pace of changes in interest rates and asset valuation, may have adverse impacts on the level of individual investor confidence and participation in the global markets and/or the level of and mix of client assets, including deposits, which would negatively impact the results of our Wealth Management business segment.Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact the results of our Investment Management business segment.The value of our financial instruments may be materially affected by market fluctuations.\"", "Reworded sentence: \"Although our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur.\"", "Added sentence: \"13December 2023 Form 10-K 13December 2023 Form 10-K 13December 2023 Form 10-K 13 Table of Contents Table of Contents Table of Contents Holding large and concentrated positions may expose us to losses.Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading) and lending businesses (including margin lending) in the event of unfavorable market movements.\"", "Added sentence: \"We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region.\"" ], "current_body": "Our results of operations have been in the past and may, in the future, be materially affected by global financial market and economic conditions, including in particular by periods of low or slowing economic growth in the United States and other major markets, both directly and indirectly through their impact on client activity levels. These include the level and volatility of equity, fixed income and commodity prices; the level, term structure and volatility of interest rates; inflation and currency values; the level of other market indices, fiscal or monetary policies established by central banks and financial regulators; and uncertainty concerning the future path of interest rates, government shutdowns, debt ceilings or funding, which may be driven by economic conditions, recessionary fears, market uncertainty or lack of confidence among investors and clients due to the effects of widespread events such as global pandemics, natural disasters, climate-related incidents, acts of war or aggression, geopolitical instability, changes in U.S. presidential administrations or Congress, changes to global trade policies, supply chain complications and the implementation of tariffs or protectionist trade policies and other factors, or a combination of these or other factors. The results of our Institutional Securities business segment, particularly results relating to our involvement in primary and secondary markets for all types of financial products, are subject to substantial market fluctuations due to a variety of factors that we cannot control or predict with great certainty. These fluctuations impact results by causing variations in business flows and activity and in the fair value of securities and other financial products. Fluctuations also occur due to the level of global market activity, which, among other things, can be impacted by market uncertainty or lack of investor and client confidence due to unforeseen economic, geopolitical or market conditions that in turn affect the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments.Periods of unfavorable market or economic conditions, including equity market levels and the level and pace of changes in interest rates and asset valuation, may have adverse impacts on the level of individual investor confidence and participation in the global markets and/or the level of and mix of client assets, including deposits, which would negatively impact the results of our Wealth Management business segment.Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact the results of our Investment Management business segment.The value of our financial instruments may be materially affected by market fluctuations. Market volatility, illiquid market conditions and disruptions in the markets may make it difficult to value and monetize certain of our financial instruments, particularly during periods of market uncertainty or displacement. Subsequent valuations in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments and may adversely impact historical or prospective fees and performance-based income (also known as incentive fees, which include carried interest) in respect of certain businesses. In addition, at the time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of our financial instruments, which may adversely affect our results of operations in future periods.In addition, financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating trading losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale, which could lead to increased individual counterparty risk for our businesses. Although our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur. market conditions that in turn affect the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments. Periods of unfavorable market or economic conditions, including equity market levels and the level and pace of changes in interest rates and asset valuation, may have adverse impacts on the level of individual investor confidence and participation in the global markets and/or the level of and mix of client assets, including deposits, which would negatively impact the results of our Wealth Management business segment. Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact the results of our Investment Management business segment. The value of our financial instruments may be materially affected by market fluctuations. Market volatility, illiquid market conditions and disruptions in the markets may make it difficult to value and monetize certain of our financial instruments, particularly during periods of market uncertainty or displacement. Subsequent valuations in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments and may adversely impact historical or prospective fees and performance-based income (also known as incentive fees, which include carried interest) in respect of certain businesses. In addition, at the time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of our financial instruments, which may adversely affect our results of operations in future periods. In addition, financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating trading losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale, which could lead to increased individual counterparty risk for our businesses. Although our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur. 13December 2023 Form 10-K 13December 2023 Form 10-K 13December 2023 Form 10-K 13 Table of Contents Table of Contents Table of Contents Holding large and concentrated positions may expose us to losses.Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading) and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”We are exposed to the risk that third parties that are indebted to us will not perform their obligations.We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses; providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, residential mortgage loans, including home equity lines of credit (“HELOCs”), and structured loans to ultra-high net worth clients, that are in most cases secured by various types of collateral whose value may at times be insufficient to fully cover the loan repayment amount, including marketable securities, private investments, commercial real estate and other financial assets.Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate and other asset values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher-than-anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring, (ii) over-collateralization, (iii) ability to call for additional collateral or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region. Although our models and estimates account for correlations among related types of exposures, a change in the market or economic environment for a concentrated product or an external factor impacting a concentrated counterparty, sector, portfolio, industry or geographic region may result in credit losses in excess of amounts forecast. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.A default by a large financial institution could adversely affect financial markets.The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearinghouses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions, or require Holding large and concentrated positions may expose us to losses.Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading) and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”We are exposed to the risk that third parties that are indebted to us will not perform their obligations.We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses; providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, residential mortgage loans, including home equity lines of credit (“HELOCs”), and structured loans to ultra-high net worth clients, that are in most cases secured by various types of collateral whose value may at times be insufficient to fully cover the loan repayment amount, including marketable securities, private investments, commercial real estate and other financial assets.", "prior_body": "Our results of operations have been in the past and may, in the future, be materially affected by global financial market and economic conditions, both directly and indirectly through their impact on client activity levels. These include the level and volatility of equity, fixed income and commodity prices, the level and term structure of interest rates, inflation and currency values, the level of other market indices, fiscal or monetary policies established by central banks and financial regulators, and uncertainty concerning government shutdowns, debt ceilings or funding, which may be driven by economic conditions, market uncertainty or lack of confidence among investors and clients due to the effects of widespread events such as global pandemics, natural disasters, climate-related incidents, acts of war or aggression, geopolitical instability, changes to global trade policies and the implementation of tariffs or protectionist trade policies and other factors, or a combination of these or other factors. For example, in 2022, the global economic and geopolitical environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), supply chain complications, recessionary fears, and geopolitical uncertainty regarding the war between Russia and Ukraine and its impact on the global markets, including the energy markets. The results of our Institutional Securities business segment, particularly results relating to our involvement in primary and secondary markets for all types of financial products, are subject to substantial market fluctuations due to a variety of factors that we cannot control or predict with great certainty. These fluctuations impact results by causing variations in business flows and activity and in the fair value of securities and other financial products. Fluctuations also occur due to the level of global market activity, which, among other things, can be impacted by market uncertainty or lack of investor and client confidence due to unforeseen economic, geopolitical or market conditions that in turn affect the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments.Periods of unfavorable market or economic conditions may have adverse impacts on the level of individual investor confidence and participation in the global markets and/or the level of and mix of client assets, which would negatively impact the results of our Wealth Management business segment.Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact the results of our Investment Management business segment.The value of our financial instruments may be materially affected by market fluctuations. Market volatility, illiquid market conditions and disruptions in the markets may make it difficult to value and monetize certain of our financial instruments, particularly during periods of market uncertainty or displacement. Subsequent valuations in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments and may adversely impact historical or prospective fees and performance-based income (also known as incentive fees, which include carried interest) in respect of certain businesses. In addition, at the time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of our financial instruments, which may adversely affect our results of operations in future periods.In addition, financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating trading losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale, which could lead to increased individual counterparty risk for our businesses. Although our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur.Holding large and concentrated positions may expose us to losses.Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including market conditions that in turn affect the size, number and timing of investment banking client assignments and transactions and the realization of returns from our principal investments. Periods of unfavorable market or economic conditions may have adverse impacts on the level of individual investor confidence and participation in the global markets and/or the level of and mix of client assets, which would negatively impact the results of our Wealth Management business segment. Substantial market fluctuations could also cause variations in the value of our investments in our funds, the flow of investment capital into or from AUM, and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact the results of our Investment Management business segment. The value of our financial instruments may be materially affected by market fluctuations. Market volatility, illiquid market conditions and disruptions in the markets may make it difficult to value and monetize certain of our financial instruments, particularly during periods of market uncertainty or displacement. Subsequent valuations in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments and may adversely impact historical or prospective fees and performance-based income (also known as incentive fees, which include carried interest) in respect of certain businesses. In addition, at the time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of our financial instruments, which may adversely affect our results of operations in future periods. In addition, financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating trading losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale, which could lead to increased individual counterparty risk for our businesses. Although our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves, severe market events have historically been difficult to predict, and we could realize significant losses if extreme market events were to occur." }, { "status": "MODIFIED", "current_title": "Economic and Market Conditions", "prior_title": "Capital ratios9", "similarity_score": 0.784, "confidence": "high", "key_changes": [ "Reworded sentence: \"The market environment in 2023 remained mixed, characterized by inflationary pressures and uncertainty regarding the future path of interest rates, which remained persistently high.\"", "Reworded sentence: \"We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses.\"", "Reworded sentence: \"For additional information on DCP, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables.\"", "Reworded sentence: \"We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses.\"" ], "current_body": "The market environment in 2023 remained mixed, characterized by inflationary pressures and uncertainty regarding the future path of interest rates, which remained persistently high. Towards the end of the year, the market environment improved from prior quarters with the expectation of lower interest rates going into 2024. However, there is continued uncertainty regarding the timing and pace of these rate reductions along with concerns regarding heightened geopolitical risks that could impact the capital markets in 2024. The market environment impacted our businesses in 2023, as discussed further in “Business Segments” herein, and, to the extent that it continues to remain uncertain, could adversely impact client confidence and related activity. For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to “Risk Factors” and “Forward-Looking Statements.” 31December 2023 Form 10-K 31December 2023 Form 10-K 31December 2023 Form 10-K 31 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Selected Non-GAAP Financial InformationWe prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on DCP, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables. Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures$ in millions202320222021Net revenues$54,143 $53,668 $59,755 Adjustment for mark-to-market losses (gains) on DCP1(434)1,198 (389)Adjusted Net revenues—non-GAAP$53,709 $54,866 $59,366 Compensation expense$24,558 $23,053 $24,628 Adjustment for mark-to-market losses (gains) on DCP1(668)716 (526)Adjusted Compensation expense—non-GAAP$23,890 $23,769 $24,102 Wealth Management Net revenues$26,268 $24,417 $24,243 Adjustment for mark-to-market losses (gains) on DCP1(282)858 (210)Adjusted Wealth Management Net revenues—non-GAAP$25,986 $25,275 $24,033 Wealth Management Compensation expense$13,972 $12,534 $13,090 Adjustment for mark-to-market losses (gains) on DCP1(412)530 (293)Adjusted Wealth Management Compensation expense—non-GAAP$13,560 $13,064 $12,797 At December 31,$ in millions202320222021Tangible equityCommon shareholders’ equity$90,288 $91,391 $97,691 Less: Goodwill and net intangible assets(23,761)(24,268)(25,192)Tangible common shareholders’ equity—non-GAAP$66,527 $67,123 $72,499 Average Monthly Balance$ in millions202320222021Tangible equityCommon shareholders’ equity$90,819 $93,873 $97,094 Less: Goodwill and net intangible assets(24,013)(24,789)(23,392)Tangible common shareholders’ equity—non-GAAP$66,806 $69,084 $73,702 Selected Non-GAAP Financial InformationWe prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference", "prior_body": "1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. 4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues. 5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein. 6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet. 7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding. 8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM. The prior period has been revised to conform to the current period presentation. See “Business Segments—Wealth Management” herein for additional information. 9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein. December 2022 Form 10-K24 December 2022 Form 10-K24 December 2022 Form 10-K24 24 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Russia and Ukraine WarWe continue to monitor the war in Ukraine and its impact on both the Ukrainian and Russian economies, as well as related impacts on other world economies and the financial markets. Our direct exposure to both Russia and Ukraine remains limited. We are not entering any new business onshore in Russia and our activities in Russia are limited to helping global clients address and close out pre-existing obligations.Refer to “Risk Factors” and “Forward-Looking Statements” for more information on the potential effects of geopolitical events and acts of war or aggression.Selected Non-GAAP Financial InformationWe prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statement and otherwise. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. In the fourth quarter of 2022, we introduced new non-GAAP financial measures. These measures exclude the impact of mark-to-market gains and losses on investments associated with certain employee deferred cash-based compensation plans from net revenues and compensation expenses. These employee deferred cash-based compensation plans are primarily reflected in our Wealth Management business segment. We consider these new measures useful for analysts, investors, and other stakeholders to allow better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.We invest directly, as a principal, in financial instruments and other investments to economically hedge certain of our obligations under these deferred cash-based compensation plans. Changes in the fair value of such investments, net of financing costs, are recorded in Net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on deferred cash-based compensation, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables. Russia and Ukraine WarWe continue to monitor the war in Ukraine and its impact on both the Ukrainian and Russian economies, as well as related impacts on other world economies and the financial markets. Our direct exposure to both Russia and Ukraine remains limited. We are not entering any new business onshore in Russia and our activities in Russia are limited to helping global clients address and close out pre-existing obligations.Refer to “Risk Factors” and “Forward-Looking Statements” for more information on the potential effects of geopolitical events and acts of war or aggression.Selected Non-GAAP Financial InformationWe prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statement and otherwise. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. In the fourth quarter of 2022, we introduced new non-GAAP financial measures. These measures exclude the impact of mark-to-market gains and losses on investments associated with certain employee deferred cash-based compensation plans from net revenues and compensation expenses. These employee deferred cash-based compensation plans are primarily reflected in our Wealth Management business segment. We consider these new measures useful for analysts, investors, and other stakeholders to allow better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the" }, { "status": "MODIFIED", "current_title": "Compensation Expense", "prior_title": "Compensation Expense", "similarity_score": 0.783, "confidence": "high", "key_changes": [ "Reworded sentence: \"Compensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of DCP investments, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits.\"", "Reworded sentence: \"Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the performance of the Firm, business unit and individual.\"" ], "current_body": "Compensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of DCP investments, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits. The factors that drive compensation for our employees vary from period to period, from segment to segment and within a segment. For certain revenue-producing employees in the Wealth Management and Investment Management business segments, compensation is largely paid on the basis of formulaic payouts that link employee compensation to revenues. Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the performance of the Firm, business unit and individual. Compensation expense for DCP is recognized over the relevant vesting period and is adjusted based on the fair value of the referenced investments until distribution. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the 35December 2023 Form 10-K 35December 2023 Form 10-K 35December 2023 Form 10-K 35 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents immediate recognition of gains and losses on the Firm's investments and the compensation expense recognized over the vesting period.Income TaxesThe Income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment. Certain items have been allocated to each business segment, generally in proportion to its respective net revenues or other relevant measures. immediate recognition of gains and losses on the Firm's investments and the compensation expense recognized over the vesting period.Income TaxesThe Income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment. Certain items have been allocated to each business segment, generally in proportion to its respective net revenues or other relevant measures. immediate recognition of gains and losses on the Firm's investments and the compensation expense recognized over the vesting period.", "prior_body": "Compensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of investments to which certain deferred compensation plans are referenced, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits. The factors that drive compensation for our employees vary from period to period, from segment to segment and within a segment. For certain revenue-producing employees in the Wealth Management and Investment Management business segments, compensation is largely paid on the basis of formulaic payouts that link employee compensation to revenues. Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the Firm’s, business unit’s and individual’s performance. Compensation expense for deferred cash-based compensation plans is recognized over the relevant vesting period and is adjusted based on the notional earnings of the referenced investments until distribution. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the immediate recognition of gains and losses on the Firm's investments and the compensation expense recognized over the vesting period." }, { "status": "MODIFIED", "current_title": "Lending commitments3", "prior_title": "Lending commitments3", "similarity_score": 0.782, "confidence": "high", "key_changes": [ "Reworded sentence: \"Total exposure—consists of Total loans, net of ACL, and Lending commitments 1.FVO includes the fair value of certain unfunded lending commitments.\"", "Reworded sentence: \"In 2023, total loans and lending commitments increased by approximately $18 billion, primarily due to an increase in Corporate lending and Secured lending facilities within the Institutional Securities business segment.\"" ], "current_body": "At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 FVO1", "prior_body": "61December 2022 Form 10-K 61December 2022 Form 10-K 61December 2022 Form 10-K 61 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.2.FVO also includes the fair value of certain unfunded lending commitments.3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements. In 2022, total loans and lending commitments increased by approximately $23 billion, primarily due to growth in Residential real estate loans and Securities-based loans within the Wealth Management business segment, as well as an increase in Secured lending facilities within the Institutional Securities business segment.See Notes 5, 6, 10 and 15 to the financial statements for further information.Allowance for Credit Losses—Loans and Lending Commitments $ in millionsACL—Loans$654 ACL—Lending commitments444 Total at December 31, 20211,098 Gross charge-offs(31)Recoveries7 Net (charge-offs) recoveries(24)Provision for credit losses280 Other(11)Total at December 31, 2022$1,343 ACL—Loans$839 ACL—Lending commitments504 Provision for Credit Losses by Business SegmentYear EndedDecember 31, 2022$ in millionsISWMTotalLoans$149 $67 $216 Lending commitments62 2 64 Total$211 $69 $280 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered.The aggregate allowance for credit losses for loans and lending commitments increased in 2022, reflecting the Provision for credit losses due to portfolio growth and deterioration in macroeconomic outlook. The base scenario used in our ACL models as of December 31, 2022 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes weak economic growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product. Forecasted U.S. Real GDP Growth Rates in Base Scenario4Q 20234Q 2024Year-over-year growth rate0.4 %1.7 %See Notes 10 to the financial statements for further information. See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL. At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.2.FVO also includes the fair value of certain unfunded lending commitments.3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements. In 2022, total loans and lending commitments increased by approximately $23 billion, primarily due to growth in Residential real estate loans and Securities-based loans within the Wealth Management business segment, as well as an increase in Secured lending facilities within the Institutional Securities business segment.See Notes 5, 6, 10 and 15 to the financial statements for further information. At December 31, 2021$ in millionsHFIHFSFVOTotalInstitutional Securities:Corporate$5,567 $8,107 $8 $13,682 Secured lending facilities31,471 3,879 — 35,350 Commercial and Residential real estate7,227 1,777 4,774 13,778 Securities-based lending and Other1,292 45 7,710 9,047 Total Institutional Securities45,557 13,808 12,492 71,857 Wealth Management:Residential real estate44,251 7 — 44,258 Securities-based lending and Other85,143 17 — 85,160 Total Wealth Management129,394 24 — 129,418 Total Investment Management15 — 135 140 Total loans2174,956 13,832 12,627 201,415 ACL(654)(654)Total loans, net of ACL$174,302 $13,832 $12,627 $200,761 Lending commitments3$134,934 Total exposure$335,695" }, { "status": "MODIFIED", "current_title": "Business Segments", "prior_title": "Business Segments", "similarity_score": 0.778, "confidence": "high", "key_changes": [ "Reworded sentence: \"See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.\"" ], "current_body": "Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.", "prior_body": "Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 23 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions. The global economic and geopolitical environment in 2022 was characterized by elevated inflation, rising interest rates and volatility in global financial markets and these factors have continued into 2023. This environment has impacted our businesses, as discussed further herein." }, { "status": "MODIFIED", "current_title": "Institutional Securities Lending Activities", "prior_title": "Institutional Securities Lending Activities", "similarity_score": 0.774, "confidence": "high", "key_changes": [ "Reworded sentence: \"The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial and Residential real estate, and Securities-based lending and Other.\"", "Reworded sentence: \"See Note 15 to the financial statements for information about our securitization activities.\"", "Added sentence: \"In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities.\"", "Added sentence: \"Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.Institutional Securities Loans and Lending Commitments Held for InvestmentAt December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158) Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form.\"" ], "current_body": "The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial and Residential real estate, and Securities-based lending and Other. As of December 31, 2023 and December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in “Institutional Securities Event-Driven Loans and Lending Commitments” herein. Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 15 to the financial statements for information about our securitization activities. 71December 2023 Form 10-K 71December 2023 Form 10-K 71December 2023 Form 10-K 71 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.Institutional Securities Loans and Lending Commitments Held for InvestmentAt December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158)Institutional Securities Commercial Real Estate Loans and Lending CommitmentsBy RegionAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalAmericas$5,410 $289 $5,699 $6,320 $378 $6,698 EMEA3,127 56 3,183 3,040 79 3,119 Asia485 — 485 445 5 450 Total$9,022 $345 $9,367 $9,805 $462 $10,267 By Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 — 2 55 — 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 LC–Lending Commitments1. Amounts include HFI, HFS and FVO loans and lending commitments. HFI loans are presented net of ACL.The current economic environment and changes in business and consumer behavior have adversely impacted commercial real estate borrowers due to pressure from higher interest rates, tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. While we continue to actively monitor all our loan portfolios, the commercial real estate sector remains under heightened focus given the sector’s sensitivity to economic and secular factors, credit conditions, and difficulties specific to certain property types, most notably office.As of December 31, 2023 and December 31, 2022, our lending against commercial real estate (“CRE”) properties totaled $9.4 billion and $10.3 billion within the Institutional Securities business segment, which represents 4.5% and 5.3% of total exposure reflected in the Institutional Securities Loans and Lending Commitments table above. Those CRE loans are originated for experienced sponsors and are generally secured by specific institutional CRE properties. In many cases, loans are subsequently syndicated or securitized on a full or partial basis, reducing our ongoing exposure.In addition to the amounts included in the table above, we provide certain secured lending facilities which are typically collateralized by pooled CRE mortgage loans and are included in Secured lending facilities in the Institutional Securities Loans and Lending Commitments Held for Investment table above. These secured lending facilities benefit from structural protections including cross-collateralization and diversification across property types. Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.Institutional Securities Loans and Lending Commitments Held for InvestmentAt December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158) Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans. Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.", "prior_body": "The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate, and Securities-based lending and Other. As of December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge 63December 2022 Form 10-K 63December 2022 Form 10-K 63December 2022 Form 10-K 63 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in “Institutional Securities Event-Driven Loans and Lending Commitments” herein.Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 16 to the financial statements for information about our securitization activities.Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 20221 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 At December 31, 2021 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$951 $2,088 $1,803 $4,842 Lending commitments1,619 5,288 8,879 15,786 Total exposure$2,570 $7,376 $10,682 $20,628 1.In the fourth quarter of the current year, approximately $0.5 billion of loans and $4.0 billion of lending commitments in a portfolio substantially consisting of revolving credit facilities across multiple corporate relationships were reclassified within Corporate Lending from Event Lending to Relationship Lending.Event-driven loans and lending commitments are associated with an underwriting and/or syndication to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.Institutional Securities Loans and Lending Commitments Held for InvestmentAt December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158)At December 31, 2021$ in millionsLoansLending CommitmentsTotalCorporate$5,567 $73,585 $79,152 Secured lending facilities31,471 10,003 41,474 Commercial real estate7,227 1,475 8,702 Other1,292 887 2,179 Total, before ACL$45,557 $85,950 $131,507 ACL$(543)$(426)$(969)Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments$ in millionsCorporate Secured Lending FacilitiesCommercial Real EstateOtherTotalACL—Loans$165 $163 $206 $9 $543 ACL—Lending commitments356 41 20 9 426 Total at December 31, 2021521 204 226 18 969 Gross charge-offs— (3)(7)(7)(17)Recoveries6 — — — 6 Net (charge-offs) recoveries6 (3)(7)(7)(11)Provision for credit losses124 4 75 8 211 Other(5)(1)(4)(1)(11)Total at December 31, 2022$646 $204 $290 $18 $1,158 ACL—Loans$235 $153 $275 $11 $674 ACL—Lending commitments411 51 15 7 484 Institutional Securities Loans Held for Investment—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2022 AtDecember 31,2021 Corporate3.6 %3.0 %Secured lending facilities0.4 %0.5 %Commercial real estate3.2 %2.9 %Other0.4 %0.7 %Total Institutional Securities loans1.3 %1.2 % loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in “Institutional Securities Event-Driven Loans and Lending Commitments” herein.Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 16 to the financial statements for information about our securitization activities.Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 20221 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 At December 31, 2021 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$951 $2,088 $1,803 $4,842 Lending commitments1,619 5,288 8,879 15,786 Total exposure$2,570 $7,376 $10,682 $20,628 1.In the fourth quarter of the current year, approximately $0.5 billion of loans and $4.0 billion of lending commitments in a portfolio substantially consisting of revolving credit facilities across multiple corporate relationships were reclassified within Corporate Lending from Event Lending to Relationship Lending.Event-driven loans and lending commitments are associated with an underwriting and/or syndication to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in “Institutional Securities Event-Driven Loans and Lending Commitments” herein. Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 16 to the financial statements for information about our securitization activities. Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans. Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market." }, { "status": "MODIFIED", "current_title": "Amounts Recognized in Compensation Expense by Segment", "prior_title": "Amounts Recognized in Compensation Expense by Segment", "similarity_score": 0.77, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in millions202320222021Institutional Securities$162 $(97)$372 Wealth Management984 11 798 Investment Management 215 131 166 Total recognized in compensation expense$1,361 $45 $1,336 December 2023 Form 10-K44 December 2023 Form 10-K44 December 2023 Form 10-K44 44 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Projected Future Compensation Obligation1$ in millionsAward liabilities at December 31, 20232, 3$5,331 Fully vested amounts to be distributed by the end of February 20244(905)Unrecognized portion of prior awards at December 31, 202331,373 2023 performance year awards granted in 20243357 Total5$6,156 1.Amounts relate to performance years 2023 and prior.2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2023.3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.4.Distributions after February of each year are generally immaterial.5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.Projected Future Compensation Expense1$ in millionsEstimated to be recognized in:2024$534 2025337 Thereafter859 Total$1,730 1.Amounts relate to performance years 2023 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.The previous table sets forth an estimate of compensation expense associated with the projected future compensation obligation.\"", "Reworded sentence: \"See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements.Accounting Development UpdatesThe Financial Accounting Standards Board has issued certain accounting updates that apply to us.\"", "Reworded sentence: \"See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements.\"" ], "current_body": "$ in millions202320222021Institutional Securities$162 $(97)$372 Wealth Management984 11 798 Investment Management 215 131 166 Total recognized in compensation expense$1,361 $45 $1,336 December 2023 Form 10-K44 December 2023 Form 10-K44 December 2023 Form 10-K44 44 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Projected Future Compensation Obligation1$ in millionsAward liabilities at December 31, 20232, 3$5,331 Fully vested amounts to be distributed by the end of February 20244(905)Unrecognized portion of prior awards at December 31, 202331,373 2023 performance year awards granted in 20243357 Total5$6,156 1.Amounts relate to performance years 2023 and prior.2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2023.3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.4.Distributions after February of each year are generally immaterial.5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.Projected Future Compensation Expense1$ in millionsEstimated to be recognized in:2024$534 2025337 Thereafter859 Total$1,730 1.Amounts relate to performance years 2023 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.The previous table sets forth an estimate of compensation expense associated with the projected future compensation obligation. Our projected future compensation obligation and expense for DCP for performance years 2023 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements.Accounting Development UpdatesThe Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and determined to be either not applicable or to not have a material impact on our financial condition or results of operations upon adoption.We adopted the following accounting update on January 1, 2024, with no material impact on our financial condition or results of operations upon adoption:•Investments—Tax Credit Structures. This accounting update permits an election to account for tax equity investments using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and recognized net in the income statement as a component of provision for income taxes. The update requires a separate accounting policy election to be made for each tax credit program. Additional disclosures are required regarding (i) the nature of our tax equity investments and (ii) the effect of our tax equity investments and related income tax credits on the financial condition and results of operations. We are currently evaluating the following accounting updates; however, we do not expect a material impact on our financial condition or results of operations upon adoption:•Income Tax Disclosures. This accounting update requires disclosure of additional information in relation to income taxes, including additional disaggregation of the income tax rate reconciliation and income taxes paid. For the income tax rate reconciliation, this update requires (1) disclosure of specific categories of reconciling items; and (2) providing additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). For income taxes paid, this update requires disclosure of information, including (1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received), disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). Additionally, the update requires disclosure of (1) income (or loss) before income taxes, disaggregated between domestic and foreign; and (2) income taxes disaggregated by federal, state and foreign. The accounting update is effective for annual periods beginning January 1, 2025, with early adoption permitted.•Segment Reporting. This accounting update requires additional reportable segment disclosures on an annual and interim basis, primarily about significant segment expenses and other segment items that are regularly provided to the Projected Future Compensation Obligation1$ in millionsAward liabilities at December 31, 20232, 3$5,331 Fully vested amounts to be distributed by the end of February 20244(905)Unrecognized portion of prior awards at December 31, 202331,373 2023 performance year awards granted in 20243357 Total5$6,156 1.Amounts relate to performance years 2023 and prior.2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2023.3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.4.Distributions after February of each year are generally immaterial.5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.Projected Future Compensation Expense1$ in millionsEstimated to be recognized in:2024$534 2025337 Thereafter859 Total$1,730 1.Amounts relate to performance years 2023 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.The previous table sets forth an estimate of compensation expense associated with the projected future compensation obligation. Our projected future compensation obligation and expense for DCP for performance years 2023 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements.", "prior_body": "$ in millions202220212020Institutional Securities$(97)$372 $851 Wealth Management11 798 1,000 Investment Management 131 166 268 Total recognized in compensation expense$45 $1,336 $2,119 37December 2022 Form 10-K 37December 2022 Form 10-K 37December 2022 Form 10-K 37 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Projected Future Compensation Obligation1$ in millionsAward liabilities at December 31, 20222, 3$4,880 Fully vested amounts to be distributed by the end of February 20234(729)Unrecognized portion of prior awards at December 31, 202231,096 2022 performance year awards granted in 20233384 Total5$5,631 1.Amounts relate to performance years 2022 and prior.2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2022.3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.4.Distributions after February of each year are generally immaterial.5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.Projected Future Compensation Expense1$ in millionsEstimated to be recognized in:2023$478 2024292 Thereafter710 Total$1,480 1.Amounts relate to performance years 2022 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.The previous table sets forth an estimate of compensation expense associated with the Projected Future Compensation Obligation. Our projected future compensation obligation and expense for deferred cash-based compensation for performance years 2022 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 20 to the financial statements.Accounting Development UpdatesThe Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and either determined to be not applicable or to not have a material impact on our financial condition or results of operations upon adoption.We adopted the following accounting updates on January 1, 2023:•Financial Instruments—Credit Losses. This accounting update eliminates the accounting guidance for Troubled Debt Restructurings (“TDRs”) and requires new disclosures regarding certain modifications of financing receivables (i.e., principal forgiveness, interest rate reductions, other-than-insignificant payment delays and term extensions) to borrowers experiencing financial difficulty. The update also requires disclosure of current period gross charge-offs by year of origination for financing receivables measured at amortized cost. We adopted this update on a prospective basis and noted no impact on our financial condition or results of operation upon adoption.We are currently evaluating the following accounting update, however, we do not expect a material impact on our financial condition or results of operations upon adoption:•Fair Value Measurement. This accounting update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The update also requires additional disclosures including the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction and circumstances that could cause the restriction to lapse. The ASU is effective January 1, 2024 with early adoption permitted.Critical Accounting EstimatesOur financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity.Fair ValueFinancial Instruments Measured at Fair ValueA significant number of our financial instruments are carried at fair value. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting estimate. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to: Projected Future Compensation Obligation1$ in millionsAward liabilities at December 31, 20222, 3$4,880 Fully vested amounts to be distributed by the end of February 20234(729)Unrecognized portion of prior awards at December 31, 202231,096 2022 performance year awards granted in 20233384 Total5$5,631 1.Amounts relate to performance years 2022 and prior.2.Balance is reflected in Other liabilities and accrued expenses in the balance sheet as of December 31, 2022.3.Amounts do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.4.Distributions after February of each year are generally immaterial.5.Of the total projected future compensation obligation, approximately 20% relates to Institutional Securities, approximately 70% relates to Wealth Management and approximately 10% relates to Investment Management.The previous table presents a rollforward of the Firm’s estimated projected future compensation obligation for existing deferred cash-based compensation awards, exclusive of any assumptions about future market conditions with respect to referenced investments.Projected Future Compensation Expense1$ in millionsEstimated to be recognized in:2023$478 2024292 Thereafter710 Total$1,480 1.Amounts relate to performance years 2022 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.The previous table sets forth an estimate of compensation expense associated with the Projected Future Compensation Obligation. Our projected future compensation obligation and expense for deferred cash-based compensation for performance years 2022 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information.For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 20 to the financial statements." }, { "status": "MODIFIED", "current_title": "Required ratios1", "prior_title": "Required ratios1", "similarity_score": 0.769, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31, 2023 and December 31, 2022, the differences between the actual and required ratios were lower under the Standardized Approach.\"", "Reworded sentence: \"Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period.\"", "Added sentence: \"Regulatory Capital$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.\"", "Added sentence: \"Regulatory Capital Ratios$ in millionsRequiredRatio1At December 31, 2023RequiredRatio1At December 31, 2022Risk-based capital— StandardizedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital78,183 77,191 Total capital88,874 86,575 Total RWA456,053 447,849 Common Equity Tier 1 capital ratio12.9 %15.2 %13.3 %15.3 %Tier 1 capital ratio14.4 %17.1 %14.8 %17.2 %Total capital ratio16.4 %19.5 %16.8 %19.3 %$ in millionsRequiredRatio1At December 31, 2023At December 31, 2022Risk-based capital—AdvancedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital 78,183 77,191 Total capital 88,190 86,159 Total RWA 448,154 438,806 Common Equity Tier 1 capital ratio10.0 %15.5 %15.6 %Tier 1 capital ratio11.5 %17.4 %17.6 %Total capital ratio13.5 %19.7 %19.6 %$ in millionsRequired Ratio1At December 31, 2023At December 31, 2022Leverage-based capitalAdjusted average assets2$1,159,626 $1,150,772 Tier 1 leverage ratio4.0 %6.7 %6.7 %Supplementary leverage exposure3$1,429,552 $1,399,403 SLR5.0 %5.5 %5.5 %1.Required ratios are inclusive of any buffers applicable as of the date presented.\"", "Added sentence: \"2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions.\"" ], "current_body": "1.Required ratios represent the regulatory minimum plus the capital buffer requirement. Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following: •Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us; •Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and •Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets). Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2023 and December 31, 2022, the differences between the actual and required ratios were lower under the Standardized Approach. Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%. CECL Deferral. Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 50% from January 1, 2023. The deferral impacts will become fully phased-in beginning on January 1, 2025. December 2023 Form 10-K54 December 2023 Form 10-K54 December 2023 Form 10-K54 54 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Regulatory Capital Ratios$ in millionsRequiredRatio1At December 31, 2023RequiredRatio1At December 31, 2022Risk-based capital— StandardizedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital78,183 77,191 Total capital88,874 86,575 Total RWA456,053 447,849 Common Equity Tier 1 capital ratio12.9 %15.2 %13.3 %15.3 %Tier 1 capital ratio14.4 %17.1 %14.8 %17.2 %Total capital ratio16.4 %19.5 %16.8 %19.3 %$ in millionsRequiredRatio1At December 31, 2023At December 31, 2022Risk-based capital—AdvancedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital 78,183 77,191 Total capital 88,190 86,159 Total RWA 448,154 438,806 Common Equity Tier 1 capital ratio10.0 %15.5 %15.6 %Tier 1 capital ratio11.5 %17.4 %17.6 %Total capital ratio13.5 %19.7 %19.6 %$ in millionsRequired Ratio1At December 31, 2023At December 31, 2022Leverage-based capitalAdjusted average assets2$1,159,626 $1,150,772 Tier 1 leverage ratio4.0 %6.7 %6.7 %Supplementary leverage exposure3$1,429,552 $1,399,403 SLR5.0 %5.5 %5.5 %1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. Regulatory Capital$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets. Regulatory Capital Ratios$ in millionsRequiredRatio1At December 31, 2023RequiredRatio1At December 31, 2022Risk-based capital— StandardizedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital78,183 77,191 Total capital88,874 86,575 Total RWA456,053 447,849 Common Equity Tier 1 capital ratio12.9 %15.2 %13.3 %15.3 %Tier 1 capital ratio14.4 %17.1 %14.8 %17.2 %Total capital ratio16.4 %19.5 %16.8 %19.3 %$ in millionsRequiredRatio1At December 31, 2023At December 31, 2022Risk-based capital—AdvancedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital 78,183 77,191 Total capital 88,190 86,159 Total RWA 448,154 438,806 Common Equity Tier 1 capital ratio10.0 %15.5 %15.6 %Tier 1 capital ratio11.5 %17.4 %17.6 %Total capital ratio13.5 %19.7 %19.6 %$ in millionsRequired Ratio1At December 31, 2023At December 31, 2022Leverage-based capitalAdjusted average assets2$1,159,626 $1,150,772 Tier 1 leverage ratio4.0 %6.7 %6.7 %Supplementary leverage exposure3$1,429,552 $1,399,403 SLR5.0 %5.5 %5.5 %1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.", "prior_body": "1.Required ratios represent the regulatory minimum plus the capital buffer requirement. Risk-Weighted Assets. RWA reflects both our on- and off-balance sheet risk, as well as capital charges attributable to the risk of loss arising from the following: •Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us; •Market risk: Adverse changes in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity; and •Operational risk: Inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets). Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At December 31, 2022 and December 31, 2021, the differences between the actual and required ratios were lower under the Standardized Approach. Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%. CECL Deferral. As of December 31, 2021, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure were calculated excluding the effect of the adoption of CECL based on the Firm’s election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 the deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025. Regulatory Capital Ratios$ in millionsRequiredRatio1At December 31, 2022RequiredRatio1At December 31, 2021Risk-based capital— StandardizedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital77,191 83,348 Total capital86,575 93,166 Total RWA447,849 471,921 Common Equity Tier 1 capital ratio13.3 %15.3 %13.2 %16.0 %Tier 1 capital ratio14.8 %17.2 %14.7 %17.7 %Total capital ratio16.8 %19.3 %16.7 %19.7 %$ in millionsRequiredRatio1At December 31, 2022At December 31, 2021Risk-based capital—AdvancedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital 77,191 83,348 Total capital 86,159 92,927 Total RWA 438,806 435,749 Common Equity Tier 1 capital ratio10.0 %15.6 %17.4 %Tier 1 capital ratio11.5 %17.6 %19.1 %Total capital ratio13.5 %19.6 %21.3 %$ in millionsRequired Ratio1At December 31, 2022At December 31, 2021Leverage-based capitalAdjusted average assets2$1,150,772 $1,169,939 Tier 1 leverage ratio4.0 %6.7 %7.1 %Supplementary leverage exposure,3$1,399,403 $1,476,962 SLR5.0 %5.5 %5.6 %1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures." }, { "status": "MODIFIED", "current_title": "Provision for Credit Losses", "prior_title": "Provision for Credit Losses", "similarity_score": 0.765, "confidence": "high", "key_changes": [ "Reworded sentence: \"In 2023, the Provision for credit losses on loans and lending commitments of $401 million was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios.\"" ], "current_body": "The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see “Credit Risk” herein. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses.•Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues.•Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues.", "prior_body": "The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $4 million in 2021 was primarily as a result of portfolio growth offset by the impact of changes in loan quality mix." }, { "status": "MODIFIED", "current_title": "Liquidity Stress Tests", "prior_title": "Liquidity Stress Tests", "similarity_score": 0.762, "confidence": "high", "key_changes": [ "Reworded sentence: \"The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following: •No government support; •No access to equity and limited access to unsecured debt markets; 49December 2023 Form 10-K 49December 2023 Form 10-K 49December 2023 Form 10-K 49 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment.\"", "Reworded sentence: \"At December 31, 2023 and December 31, 2022, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.\"" ], "current_body": "We use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework. The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following: •No government support; •No access to equity and limited access to unsecured debt markets; 49December 2023 Form 10-K 49December 2023 Form 10-K 49December 2023 Form 10-K 49 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.At December 31, 2023 and December 31, 2022, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.Liquidity ResourcesWe maintain sufficient Liquidity Resources to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations. Liquidity Resources by Type of InvestmentAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Cash deposits with central banks$64,205 $66,330 Unencumbered HQLA securities1:U.S. government obligations137,635 122,110 U.S. agency and agency mortgage-backed securities83,733 86,628 Non-U.S. sovereign obligations220,117 23,416 Other investment grade securities678 693 Total HQLA1$306,368 $299,177 Cash deposits with banks (non-HQLA)8,136 8,190 Total Liquidity Resources$314,504 $307,367 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.2.Primarily composed of unencumbered French, Japanese, U.K., German and Spanish government obligations.Liquidity Resources by Bank and Non-Bank Legal EntitiesAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Bank legal entitiesU.S.$132,870 $132,663 Non-U.S.5,359 6,101 Total Bank legal entities138,229 138,764 Non-Bank legal entitiesU.S.:Parent Company58,494 53,681 Non-Parent Company56,459 58,839 Total U.S.114,953 112,520 Non-U.S.61,322 56,083 Total Non-Bank legal entities176,275 168,603 Total Liquidity Resources$314,504 $307,367 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt, and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable •Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.At December 31, 2023 and December 31, 2022, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.Liquidity ResourcesWe maintain sufficient Liquidity Resources to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations. •Repayment of all unsecured debt maturing within the stress horizon; •Higher haircuts for and significantly lower availability of secured funding; •Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades; •Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral; •Discretionary unsecured debt buybacks; •Drawdowns on lending commitments provided to third parties; and •Client cash withdrawals and reduction in customer short positions that fund long positions. Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities. At December 31, 2023 and December 31, 2022, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.", "prior_body": "We use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework. The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following: •No government support; •No access to equity and limited access to unsecured debt markets; •Repayment of all unsecured debt maturing within the stress horizon; •Higher haircuts for and significantly lower availability of secured funding; •Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades; •Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral; •Discretionary unsecured debt buybacks; •Drawdowns on lending commitments provided to third parties; and •Client cash withdrawals and reduction in customer short positions that fund long positions. Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities. At December 31, 2022 and December 31, 2021, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests. December 2022 Form 10-K42 December 2022 Form 10-K42 December 2022 Form 10-K42 42 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Liquidity ResourcesWe maintain sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations. Liquidity Resources by Type of InvestmentAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Cash deposits with central banks$58,818 $61,447 Unencumbered HQLA securities1:U.S. government obligations136,020 132,788 U.S. agency and agency mortgage-backed securities87,591 89,279 Non-U.S. sovereign obligations220,583 15,812 Other investment grade securities694 607 Total HQLA1$303,706 $299,933 Cash deposits with banks (non-HQLA)8,544 8,068 Total Liquidity Resources$312,250 $308,001 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.2.Primarily composed of unencumbered French, Japanese, U.K., German and Dutch government obligations.Liquidity Resources by Bank and Non-Bank Legal EntitiesAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Bank legal entitiesU.S.$134,845 $133,306 Non-U.S.6,980 7,607 Total Bank legal entities141,825 140,913 Non-Bank legal entitiesU.S.:Parent Company56,111 54,189 Non-Parent Company54,813 55,098 Total U.S.110,924 109,287 Non-U.S.59,501 57,801 Total Non-Bank legal entities170,425 167,088 Total Liquidity Resources$312,250 $308,001 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR requires that large banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR requires large banking organizations to maintain sufficiently stable sources of funding over a one-year time horizon.As of December 31, 2022, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.Liquidity Coverage Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Eligible HQLA1 Cash deposits with central banks$52,765 $57,133 Securities2186,551 183,102 Total Eligible HQLA1$239,316 $240,235 LCR132 %136 %1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.Funding ManagementWe manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.Secured FinancingThe liquid nature of the marketable securities and short-term receivables arising principally from sales and trading Liquidity ResourcesWe maintain sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations. Liquidity Resources by Type of InvestmentAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Cash deposits with central banks$58,818 $61,447 Unencumbered HQLA securities1:U.S. government obligations136,020 132,788 U.S. agency and agency mortgage-backed securities87,591 89,279 Non-U.S. sovereign obligations220,583 15,812 Other investment grade securities694 607 Total HQLA1$303,706 $299,933 Cash deposits with banks (non-HQLA)8,544 8,068 Total Liquidity Resources$312,250 $308,001 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.2.Primarily composed of unencumbered French, Japanese, U.K., German and Dutch government obligations.Liquidity Resources by Bank and Non-Bank Legal EntitiesAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Bank legal entitiesU.S.$134,845 $133,306 Non-U.S.6,980 7,607 Total Bank legal entities141,825 140,913 Non-Bank legal entitiesU.S.:Parent Company56,111 54,189 Non-Parent Company54,813 55,098 Total U.S.110,924 109,287 Non-U.S.59,501 57,801 Total Non-Bank legal entities170,425 167,088 Total Liquidity Resources$312,250 $308,001" }, { "status": "MODIFIED", "current_title": "Liquidity Risk", "prior_title": "Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.", "similarity_score": 0.76, "confidence": "high", "key_changes": [ "Reworded sentence: \"Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets.\"", "Reworded sentence: \"and other geographic areas, could impair our ability to raise funding.In addition, our ability to raise funding could be impaired if investors, depositors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading, credit or operational losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations.\"", "Reworded sentence: \"The rating agencies continue to monitor certain Firm-specific and industrywide factors that are important to the determination of our credit ratings.\"" ], "current_body": "Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern, as well as the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. For more information on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”Liquidity is essential to our businesses and we rely on external sources to finance a significant portion of our operations.Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding.In addition, our ability to raise funding could be impaired if investors, depositors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading, credit or operational losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity.If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition.Our borrowing costs and access to the debt capital markets depend on our credit ratings.The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industrywide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions.Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, on how we monitor and manage liquidity risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk.”", "prior_body": "Liquidity is essential to our businesses. Our liquidity could be negatively affected by our inability to raise funding in the long-term or short-term debt capital markets, our inability to access the secured lending markets, our inability to attract and retain deposits, or unanticipated outflows of cash or collateral by customers or clients. Factors that we cannot control, such as disruption of the financial markets or negative views about the financial services industry generally, including concerns regarding fiscal matters in the U.S. and other geographic areas, could impair our ability to raise funding. In addition, our ability to raise funding could be impaired if investors or lenders develop a negative perception of our long-term or short-term financial prospects due to factors such as an incurrence of large trading losses, a downgrade by the rating agencies, a decline in the level of our business activity, if regulatory authorities take significant action against us or our industry, or if we discover significant employee misconduct or illegal activity. If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment portfolios or trading assets, to meet maturing liabilities or other obligations. We may be unable to sell some of our assets or we may have to sell assets at a discount to market value, either of which could adversely affect our results of operations, cash flows and financial condition.Our borrowing costs and access to the debt capital markets depend on our credit ratings.The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industry-wide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions.Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer term counterparty performance is a key consideration, such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade.Termination of our trading and other agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”We are a holding company and depend on payments from our subsidiaries.The Parent Company has no operations and depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such either of which could adversely affect our results of operations, cash flows and financial condition." }, { "status": "MODIFIED", "current_title": "Institutional Securities Event-Driven Loans and Lending Commitments", "prior_title": "Institutional Securities Event-Driven Loans and Lending Commitments", "similarity_score": 0.759, "confidence": "high", "key_changes": [ "Reworded sentence: \"At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities.\"" ], "current_body": "At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.", "prior_body": "At December 31, 20221 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140" }, { "status": "MODIFIED", "current_title": "Credit Spread Risk Sensitivity1", "prior_title": "Credit Spread Risk Sensitivity1", "similarity_score": 0.755, "confidence": "high", "key_changes": [ "Reworded sentence: \"$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread.\"", "Removed sentence: \"Historically, net interest income sensitivity for our U.S.\"", "Removed sentence: \"Bank Subsidiaries was representative of such sensitivity for the Wealth Management business segment and, accordingly, we presented net interest income sensitivity for our U.S.\"", "Removed sentence: \"However, over time the Wealth Management business segment has grown its assets that generate net interest income outside of the U.S.\"", "Removed sentence: \"Bank Subsidiaries, such as margin and other lending on non-bank entities, and this growth has been further accelerated by the acquisition of E*TRADE.\"" ], "current_body": "$ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread. Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening. The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.", "prior_body": "$ in millionsAtDecember 31,2022 AtDecember 31,2021 Derivatives$7 $7 Borrowings carried at fair value39 48 1.Amounts represent the potential gain for each 1 bps widening of our credit spread. Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2022 decreased from December 31, 2021 primarily due to widening credit spreads, partially offset by new debt issuance. The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Historically, net interest income sensitivity for our U.S. Bank Subsidiaries was representative of such sensitivity for the Wealth Management business segment and, accordingly, we presented net interest income sensitivity for our U.S. Bank Subsidiaries. However, over time the Wealth Management business segment has grown its assets that generate net interest income outside of the U.S. Bank Subsidiaries, such as margin and other lending on non-bank entities, and this growth has been further accelerated by the acquisition of E*TRADE. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits." }, { "status": "MODIFIED", "current_title": "Asset Management", "prior_title": "Investments", "similarity_score": 0.754, "confidence": "high", "key_changes": [ "Reworded sentence: \"Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.\"", "Reworded sentence: \"These performance fees are generally recognized on a quarterly or annual basis.\"", "Reworded sentence: \"Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense.\"", "Reworded sentence: \"OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management.\"", "Reworded sentence: \"These performance fees are generally recognized on a quarterly or annual basis.\"" ], "current_body": "Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products. Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested. Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis. Net InterestInterest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis.", "prior_body": "Investments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions. Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions. Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. 27December 2022 Form 10-K 27December 2022 Form 10-K 27December 2022 Form 10-K 27 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, there are certain sponsored Investment Management funds consolidated by us where revenues are primarily attributable to holders of noncontrolling interests. Commissions and Fees Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to securities, services related to sales and trading activities, and sales of other products. Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives. Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, futures and options. Wealth Management also earns revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution. Asset ManagementAsset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested.Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized annually.Net InterestInterest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income.OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities lending products, The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, there are certain sponsored Investment Management funds consolidated by us where revenues are primarily attributable to holders of noncontrolling interests. Commissions and Fees Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to securities, services related to sales and trading activities, and sales of other products. Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives. Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, futures and options. Wealth Management also earns revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution. Asset ManagementAsset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products.Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested.Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized annually.Net InterestInterest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, there are certain sponsored Investment Management funds consolidated by us where revenues are primarily attributable to holders of noncontrolling interests." }, { "status": "MODIFIED", "current_title": "Capital Management", "prior_title": "Common Stock Repurchases", "similarity_score": 0.748, "confidence": "medium", "key_changes": [ "Reworded sentence: \"We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines.\"", "Removed sentence: \"The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act.\"", "Removed sentence: \"For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S.\"", "Removed sentence: \"Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC.\"", "Removed sentence: \"In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants.\"" ], "current_body": "We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses. Common Stock Repurchasesin millions, except for per share data202320222021Number of shares62 113 126 Average price per share$85.35 $87.25 $91.13 Total$5,300 $9,865 $11,464 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 17 to the financial statements.For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.Common Stock Dividend AnnouncementAnnouncement dateJanuary 16, 2024Amount per share$0.85Date paidFebruary 15, 2024Shareholders of record as ofJanuary 31, 2024For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.For additional information on our common stock and information on our preferred stock, see Note 17 to the financial statements.Off-Balance Sheet Arrangements We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 15 to the financial statements.For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 14 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.Regulatory RequirementsRegulatory Capital FrameworkWe are an FHC under the BHC Act and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank", "prior_body": "in millions, except for per share data202220212020Number of shares113 126 29 Average price per share$87.25 $91.13 $46.01 Total$9,865 $11,464 $1,347 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress 45December 2022 Form 10-K 45December 2022 Form 10-K 45December 2022 Form 10-K 45 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Capital Buffer” herein and Note 18 to the financial statements.For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.Common Stock Dividend AnnouncementAnnouncement dateJanuary 17, 2023Amount per share$0.775Date paidFebruary 15, 2023Shareholders of record as ofJanuary 31, 2023For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.For additional information on our common stock and information on our preferred stock, see Note 18 to the financial statements.Off-Balance Sheet Arrangements We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 16 to the financial statements.For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 15 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.Regulatory RequirementsRegulatory Capital FrameworkWe are an FHC under the Bank Holding Company Act of 1956, as amended (“BHC Act”) and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries provisionally registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are Swap Entities, see Note 17 to the financial statements.Regulatory Capital RequirementsWe are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. Capital Buffer RequirementsAtDecember 31,2022 AtDecember 31,2021 At December 31, 2022 and December 31, 2021StandardizedStandardizedAdvancedCapital buffersCapital conservation buffer——2.5%SCB15.8%5.7%N/AG-SIB capital surcharge23.0%3.0%3.0%CCyB30%0%0%Capital buffer requirement8.8%8.7%5.5%1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein.2.For a further discussion of the G-SIB capital surcharge, see “G-SIB Capital Surcharge” herein.3.The CCyB can be set up to 2.5% but is currently set by the Federal Reserve at zero.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. Capital Buffer” herein and Note 18 to the financial statements.For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.Common Stock Dividend AnnouncementAnnouncement dateJanuary 17, 2023Amount per share$0.775Date paidFebruary 15, 2023Shareholders of record as ofJanuary 31, 2023For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.For additional information on our common stock and information on our preferred stock, see Note 18 to the financial statements.Off-Balance Sheet Arrangements We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 16 to the financial statements.For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 15 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.Regulatory RequirementsRegulatory Capital FrameworkWe are an FHC under the Bank Holding Company Act of 1956, as amended (“BHC Act”) and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated Capital Buffer” herein and Note 18 to the financial statements. For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein." }, { "status": "MODIFIED", "current_title": "Goodwill and Intangible Assets", "prior_title": "Goodwill and Intangible Assets", "similarity_score": 0.747, "confidence": "medium", "key_changes": [ "Reworded sentence: \"For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case, the quantitative test would be performed.\"", "Reworded sentence: \"If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, December 2023 Form 10-K46 December 2023 Form 10-K46 December 2023 Form 10-K46 46 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents limited by the carrying amount of goodwill allocated to that reporting unit.The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit.\"", "Reworded sentence: \"In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of comparable companies.\"" ], "current_body": "Goodwill We test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill. For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case, the quantitative test would be performed. When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, December 2023 Form 10-K46 December 2023 Form 10-K46 December 2023 Form 10-K46 46 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents limited by the carrying amount of goodwill allocated to that reporting unit.The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit. The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology. In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of comparable companies. The discounted cash flow methodology uses projected future cash flows based on the reporting units’ earnings forecast. The discount rate used represents an estimate of the cost of equity for that reporting unit based on the Capital Asset Pricing Model.At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value.Intangible AssetsIntangible assets are initially recorded at cost, or in the situation where acquired as part of a business combination, at the fair value determined as part of the acquisition method of accounting. Subsequently, amortizable intangible assets are carried in the balance sheet at amortized cost, where amortization is recognized over their estimated useful lives. Indefinite lived intangible assets are not amortized but are tested for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist.On a quarterly basis: •All intangible assets are assessed for the presence of impairment indicators. Where such indicators are present, an evaluation for impairment is conducted. •For amortizable intangible assets, an impairment loss exists if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows. •For indefinite-lived intangible assets, an impairment exists if the carrying amount of the intangible asset exceeds its fair value. •Amortizable intangible assets are assessed for any indication that the remaining useful life or the finite life classification should be revised. In such cases, the remaining carrying amount is amortized prospectively over the revised useful life, unless it is determined that the life of the intangible asset is indefinite, in which case the intangible asset is not amortized.•Indefinite-lived intangible assets are assessed for any indication that the life of the intangible asset is no longer indefinite; in such cases, the carrying amount of the intangible asset is amortized prospectively over its remaining useful life.The initial valuation of an intangible asset as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of an impairment assessment are subjective and based, in part, on inputs that are unobservable and can be subject to uncertainty. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, customer attrition rates and discount rates.For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Unanticipated declines in our revenue generating capability, adverse market or economic events, and regulatory actions, could result in material impairment charges in future periods.See Notes 2 and 10 to the financial statements for additional information about goodwill and intangible assets.Legal and Regulatory ContingenciesIn the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution.Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital markets activities, financial products or offerings sponsored, underwritten or sold by us, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.We contest liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can limited by the carrying amount of goodwill allocated to that reporting unit.The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit. The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology. In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of comparable companies. The discounted cash flow methodology uses projected future cash flows based on the reporting units’ earnings forecast. The discount rate used represents an estimate of the cost of equity for that reporting unit based on the Capital Asset Pricing Model.At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value.Intangible AssetsIntangible assets are initially recorded at cost, or in the situation where acquired as part of a business combination, at the fair value determined as part of the acquisition method of accounting. Subsequently, amortizable intangible assets are carried in the balance sheet at amortized cost, where amortization is recognized over their estimated useful lives. Indefinite lived intangible assets are not amortized but are tested for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist.On a quarterly basis: •All intangible assets are assessed for the presence of impairment indicators. Where such indicators are present, an evaluation for impairment is conducted. •For amortizable intangible assets, an impairment loss exists if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows. •For indefinite-lived intangible assets, an impairment exists if the carrying amount of the intangible asset exceeds its fair value. •Amortizable intangible assets are assessed for any indication that the remaining useful life or the finite life classification should be revised. In such cases, the remaining carrying amount is amortized prospectively over the revised useful life, unless it is determined that the life of the intangible asset is indefinite, in which case the intangible asset is not amortized.•Indefinite-lived intangible assets are assessed for any indication that the life of the intangible asset is no longer indefinite; in such cases, the carrying amount of the intangible asset is amortized prospectively over its remaining useful life. limited by the carrying amount of goodwill allocated to that reporting unit. The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit. The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology. In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of comparable companies. The discounted cash flow methodology uses projected future cash flows based on the reporting units’ earnings forecast. The discount rate used represents an estimate of the cost of equity for that reporting unit based on the Capital Asset Pricing Model. At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value.", "prior_body": "Goodwill We test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill. For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case the quantitative test would be performed. When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, limited by the carrying amount of goodwill allocated to that reporting unit. The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit. The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology. In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies. The discounted cash flow methodology uses projected future cash flows based on the reporting units’ earnings forecast. The discount rate used represents an estimate of the cost of equity for that reporting unit based on the Capital Asset Pricing Model. At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value." }, { "status": "MODIFIED", "current_title": "Average Fee Rates1", "prior_title": "Average Fee Rates1", "similarity_score": 0.747, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Fee rate in bps202320222021Equity71 70 74 Fixed income35 35 38 Alternatives and Solutions32 34 36 Long-Term AUM44 46 51 Liquidity and Overlay Services13 11 5 Total AUM34 34 37 Long-Term AUM 1.Based on Asset management revenues, net of waivers, excluding performance-based fees and other non-management fees.\"", "Reworded sentence: \"Asset management and other related fees within the Investment Management segment are primarily generated from Equity, Fixed Income and the following products: Alternatives and Solutions.\"", "Reworded sentence: \"Bank Subsidiaries accept deposits, provide loans to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals, and invest in securities.\"", "Reworded sentence: \"For a further discussion about loans and lending commitments, see Notes 9 and 14 to the financial statements.U.S.\"", "Reworded sentence: \"The menu of investments, which is selected by the Firm, includes fixed income, equity, commodity and money market funds.Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select.\"" ], "current_body": "Fee rate in bps202320222021Separately managed12 12 14 Unified managed92 94 95 Advisor80 81 82 Portfolio manager91 92 93 Subtotal65 66 72 Cash management6 6 5 Total fee-based client assets64 65 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets. Asset management revenues within the Wealth Management segment are primarily generated from the following types of accounts: •Separately managed—accounts by which third party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset December 2023 Form 10-K40 December 2023 Form 10-K40 December 2023 Form 10-K40 40 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents manager. Only one third-party asset manager strategy can be held per account.•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. manager. Only one third-party asset manager strategy can be held per account.•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. manager. Only one third-party asset manager strategy can be held per account. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client. •Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments. •Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change. •Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments. 41December 2023 Form 10-K 41December 2023 Form 10-K 41December 2023 Form 10-K 41 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Investment ManagementIncome Statement Information % Change$ in millions20232022202120232022RevenuesAsset management and related fees$5,231 $5,332 $5,576 (2)%(4)%Performance-based income and other1139 43 644 N/M(93)%Net revenues5,370 5,375 6,220 — %(14)%Compensation and benefits2,217 2,273 2,373 (2)%(4)%Non-compensation expenses2,311 2,295 2,169 1 %6 %Total non-interest expenses4,528 4,568 4,542 (1)%1 %Income before provision for income taxes842 807 1,678 4 %(52)%Provision for income taxes199 162 356 23 %(54)%Net income643 645 1,322 — %(51)%Net income applicable to noncontrolling interests4 (15)(25)127 %40 %Net income applicable to Morgan Stanley$639 $660 $1,347 (3)%(51)%1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows.Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. The market environment and client preferences in recent quarters have impacted the mix of our average Long-Term AUM level across certain asset classes. To the extent these conditions continue, we would expect our Asset management revenue to continue to be negatively impacted.See “Assets Under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues increased to $139 million in 2023, from $43 million in the prior year, primarily due to mark-to-market gains in 2023 compared with losses in the prior year on DCP investments and investments in public funds, partially offset by lower accrued carried interest in certain private funds. Non-Interest ExpensesNon-interest expenses of $4,528 million in 2023 decreased 1% from the prior year, primarily due to lower Compensation and benefits expenses. •Compensation and benefits expenses decreased primarily due to lower expenses related to compensation associated with carried interest, partially offset by higher expenses related to DCP.•Non-compensation expenses were relatively unchanged for the current year. Investment ManagementIncome Statement Information % Change$ in millions20232022202120232022RevenuesAsset management and related fees$5,231 $5,332 $5,576 (2)%(4)%Performance-based income and other1139 43 644 N/M(93)%Net revenues5,370 5,375 6,220 — %(14)%Compensation and benefits2,217 2,273 2,373 (2)%(4)%Non-compensation expenses2,311 2,295 2,169 1 %6 %Total non-interest expenses4,528 4,568 4,542 (1)%1 %Income before provision for income taxes842 807 1,678 4 %(52)%Provision for income taxes199 162 356 23 %(54)%Net income643 645 1,322 — %(51)%Net income applicable to noncontrolling interests4 (15)(25)127 %40 %Net income applicable to Morgan Stanley$639 $660 $1,347 (3)%(51)%1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.", "prior_body": "Fee rate in bps202220212020Separately managed12 14 14 Unified managed94 95 99 Advisor81 82 85 Portfolio manager92 93 94 Subtotal66 72 73 Cash management6 5 5 Total fee-based client assets65 70 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets. •Inflows—include new accounts, account transfers, deposits, dividends and interest. •Outflows—include closed or terminated accounts, account transfers, withdrawals and client fees. •Market impact—includes realized and unrealized gains and losses on portfolio investments. •Separately managed—accounts by which third-party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset manager. Only one third-party asset manager strategy can be held per account. 33December 2022 Form 10-K 33December 2022 Form 10-K 33December 2022 Form 10-K 33 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.•Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments.•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. •Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client. •Advisor—accounts where the investment decisions must be approved by the client and the financial advisor must obtain approval each time a change is made to the account or its investments. •Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change. •Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investment. December 2022 Form 10-K34 December 2022 Form 10-K34 December 2022 Form 10-K34 34 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Investment ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management and related fees$5,332 $5,576 $3,013 (4)%85 %Performance-based income and other143 644 721 (93)%(11)%Net revenues5,375 6,220 3,734 (14)%67 %Compensation and benefits2,273 2,373 1,542 (4)%54 %Non-compensation expenses2,295 2,169 1,322 6 %64 %Total non-interest expenses4,568 4,542 2,864 1 %59 %Income before provision for income taxes807 1,678 870 (52)%93 %Provision for income taxes162 356 171 (54)%108 %Net income645 1,322 699 (51)%89 %Net income applicable to noncontrolling interests(15)(25)84 40 %(130)%Net income applicable to Morgan Stanley$660 $1,347 $615 (51)%119 %1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Acquisition of Eaton VanceThe comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements.Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,332 million in 2022 decreased 4% compared with the prior year, reflecting the impact of the decline in the equity markets, partially offset by incremental revenues as a result of the Eaton Vance acquisition and the impact of lower fee waivers in certain money market funds. Asset management revenues are influenced by the level and relative mix of AUM and related fee rates. The current market environment may impact AUM and net flows within asset classes and therefore our asset management revenues.See “Assets under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues were $43 million in 2022, representing a 93% decrease from the prior year, primarily due to lower accrued carried interest in certain private equity and real estate funds, losses on investments associated with certain employee deferred cash-based compensation plans, and mark-to-market losses on public investments. Non-interest ExpensesNon-interest expenses of $4,568 million in 2022 were relatively unchanged from the prior year period, reflecting higher Non-compensation expenses offset by lower Compensation and benefits.•Compensation and benefits expenses decreased primarily due to lower discretionary incentive compensation driven by lower asset management revenues and lower compensation associated with carried interest, partially offset by the impact of incremental compensation as a result of the Eaton Vance acquisition.•Non-compensation expenses increased primarily due to higher marketing and business development costs and incremental expenses as a result of the Eaton Vance acquisition. Investment ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management and related fees$5,332 $5,576 $3,013 (4)%85 %Performance-based income and other143 644 721 (93)%(11)%Net revenues5,375 6,220 3,734 (14)%67 %Compensation and benefits2,273 2,373 1,542 (4)%54 %Non-compensation expenses2,295 2,169 1,322 6 %64 %Total non-interest expenses4,568 4,542 2,864 1 %59 %Income before provision for income taxes807 1,678 870 (52)%93 %Provision for income taxes162 356 171 (54)%108 %Net income645 1,322 699 (51)%89 %Net income applicable to noncontrolling interests(15)(25)84 40 %(130)%Net income applicable to Morgan Stanley$660 $1,347 $615 (51)%119 %1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.Acquisition of Eaton VanceThe comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements." }, { "status": "MODIFIED", "current_title": "Legal and Regulatory Contingencies", "prior_title": "Legal and Regulatory Contingencies", "similarity_score": 0.74, "confidence": "medium", "key_changes": [ "Reworded sentence: \"In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations.\"", "Reworded sentence: \"See Note 14 to the financial statements for additional information on legal contingencies.\"" ], "current_body": "In the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets. We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital markets activities, financial products or offerings sponsored, underwritten or sold by us, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief. We contest liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can 47December 2023 Form 10-K 47December 2023 Form 10-K 47December 2023 Form 10-K 47 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents reasonably estimate the amount of that loss or the range of loss, we accrue an estimated loss by a charge to income. In many legal proceedings and investigations, it is inherently difficult to determine whether any loss is probable or reasonably possible, or to estimate the amount of any loss. In addition, even where we have determined that a loss is probable or reasonably possible or an exposure to loss or range of loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, we are often unable to reasonably estimate the amount of the loss or range of loss. It is particularly difficult to determine if a loss is probable or reasonably possible, or to estimate the amount of loss, where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, forfeiture, disgorgement or penalties. Numerous issues may need to be resolved in an investigation or proceeding before a determination can be made that a loss or additional loss (or range of loss or range of additional loss) is probable or reasonably possible, or to estimate the amount of loss, including through potentially lengthy discovery or determination of important factual matters, determination of issues related to class certification, the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals.See Note 14 to the financial statements for additional information on legal contingencies.Income TaxesWe are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have business operations. These tax laws are complex and subject to interpretation by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws and make estimates about certain items affecting taxable income when determining the provision for income taxes in the various tax jurisdictions.Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. We periodically evaluate the likelihood of assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.Our provision for income taxes is composed of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse.Our deferred tax balances may also include deferred assets related to tax attribute carryforwards, such as net operating losses and tax credits that will be realized through reduction of future tax liabilities and, in some cases, are subject to expiration if not utilized within certain periods. We perform regular reviews to ascertain whether deferred tax assets are realizable. These reviews include management’s estimates and assumptions regarding future taxable income and incorporate various tax planning strategies, including strategies that may be available to tax attribute carryforwards before they expire.Once the deferred tax asset balances have been determined, we may record a valuation allowance against the deferred tax asset balances to reflect the amount we estimate is more likely than not to be realized at a future date. Both current and deferred income taxes may reflect adjustments related to our unrecognized tax benefits.Significant judgment is required in estimating the consolidated provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance, if any), accrued interest or penalties and uncertain tax positions. Revisions in estimates and/or the actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.See Note 2 to the financial statements for additional information on our significant assumptions, judgments and interpretations associated with the accounting for income taxes and Note 21 to the financial statements for additional information on our tax examinations.Liquidity and Capital ResourcesOur liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and the Board. Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Corporate Treasury department (“Treasury”), Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the BRC. reasonably estimate the amount of that loss or the range of loss, we accrue an estimated loss by a charge to income. In many legal proceedings and investigations, it is inherently difficult to determine whether any loss is probable or reasonably possible, or to estimate the amount of any loss. In addition, even where we have determined that a loss is probable or reasonably possible or an exposure to loss or range of loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, we are often unable to reasonably estimate the amount of the loss or range of loss. It is particularly difficult to determine if a loss is probable or reasonably possible, or to estimate the amount of loss, where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, forfeiture, disgorgement or penalties. Numerous issues may need to be resolved in an investigation or proceeding before a determination can be made that a loss or additional loss (or range of loss or range of additional loss) is probable or reasonably possible, or to estimate the amount of loss, including through potentially lengthy discovery or determination of important factual matters, determination of issues related to class certification, the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals.See Note 14 to the financial statements for additional information on legal contingencies.Income TaxesWe are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have business operations. These tax laws are complex and subject to interpretation by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws and make estimates about certain items affecting taxable income when determining the provision for income taxes in the various tax jurisdictions.Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. We periodically evaluate the likelihood of assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change. reasonably estimate the amount of that loss or the range of loss, we accrue an estimated loss by a charge to income. In many legal proceedings and investigations, it is inherently difficult to determine whether any loss is probable or reasonably possible, or to estimate the amount of any loss. In addition, even where we have determined that a loss is probable or reasonably possible or an exposure to loss or range of loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, we are often unable to reasonably estimate the amount of the loss or range of loss. It is particularly difficult to determine if a loss is probable or reasonably possible, or to estimate the amount of loss, where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, forfeiture, disgorgement or penalties. Numerous issues may need to be resolved in an investigation or proceeding before a determination can be made that a loss or additional loss (or range of loss or range of additional loss) is probable or reasonably possible, or to estimate the amount of loss, including through potentially lengthy discovery or determination of important factual matters, determination of issues related to class certification, the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question. Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals. See Note 14 to the financial statements for additional information on legal contingencies.", "prior_body": "In the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress.We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business and involving, among other matters, investment banking advisory services, capital markets activities, sales, trading, financing, prime-brokerage, market-making activities, wealth and investment management services, financial products or offerings sponsored, underwritten or sold by us, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions, limitations on our ability to conduct certain business, or other relief.Accruals for litigation and regulatory proceedings are generally determined on a case-by-case basis. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss or range of loss or additional range of loss can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals.See Note 15 to the financial statements for additional information on legal contingencies.Income TaxesWe are subject to the income and indirect tax laws of the U.S., its states and municipalities and those of the foreign Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or are in financial distress. We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business and involving, among other matters, investment banking advisory services, capital markets activities, sales, trading, financing, prime-brokerage, market-making activities, wealth and investment management services, financial products or offerings sponsored, underwritten or sold by us, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions, limitations on our ability to conduct certain business, or other relief. Accruals for litigation and regulatory proceedings are generally determined on a case-by-case basis. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss or range of loss or additional range of loss can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question. Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals. See Note 15 to the financial statements for additional information on legal contingencies." }, { "status": "MODIFIED", "current_title": "Non-Interest Expenses", "prior_title": "Non-interest Expenses", "similarity_score": 0.738, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Non-interest expenses of $19,607 million in 2023 increased 10% compared with the prior year, as a result of higher Compensation and benefits expense and higher Non-compensation expense.\"" ], "current_body": "($ in millions) •Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation. 2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023. •Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter.", "prior_body": "Non-interest expenses of $17,467 million in 2022 decreased 3% compared with the prior year due to lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses. •Compensation and benefits expenses decreased in the current year primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price, and lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses.•Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology.Income Tax ItemsThe effective tax rate of 19.5% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses. •Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology." }, { "status": "MODIFIED", "current_title": "Wealth Management Loans and Lending Commitments", "prior_title": "Total at December 31, 2022", "similarity_score": 0.735, "confidence": "medium", "key_changes": [ "Reworded sentence: \"At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$76,923 $7,679 $1,494 $133 $86,229 Residential real estateloans1 91 1,255 58,950 60,297 Total loans, net of ACL$76,924 $7,770 $2,749 $59,083 $146,526 Lending commitments16,312 2,937 19 344 19,612 Total exposure$93,236 $10,707 $2,768 $59,427 $166,138 Residential real estate loans At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estate loans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.\"", "Reworded sentence: \"Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.\"", "Reworded sentence: \"The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Commercial Real Estate Loans and Lending Commitments by Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 — 454 330 — 330 Hotel400 — 400 419 — 419 Other253 — 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 LC–Lending Commitments1.Amounts include HFI loans and lending commitments.\"", "Reworded sentence: \"Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.\"" ], "current_body": "At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$76,923 $7,679 $1,494 $133 $86,229 Residential real estateloans1 91 1,255 58,950 60,297 Total loans, net of ACL$76,924 $7,770 $2,749 $59,083 $146,526 Lending commitments16,312 2,937 19 344 19,612 Total exposure$93,236 $10,707 $2,768 $59,427 $166,138 Residential real estate loans At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estate loans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans. Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral. Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients. Securities-based lending and Other loans are generally secured by various types of eligible collateral, including marketable securities, private investments, commercial real estate and other financial assets.Residential real estate loans consist of first- and second-lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Commercial Real Estate Loans and Lending Commitments by Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 — 454 330 — 330 Hotel400 — 400 419 — 419 Other253 — 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 LC–Lending Commitments1.Amounts include HFI loans and lending commitments. HFI loans are presented net of ACL.As of December 31, 2023 and December 31, 2022, our direct lending against CRE totaled $7.1 billion and $6.6 billion within the Wealth Management business segment, which represents 4.3% and 4.0% of total exposure reflected in the Wealth Management Loans and Lending Commitments table above, primarily included within Securities-based lending and Other loans. Such loans are originated through our private banking platform, are both secured and generally benefiting from full or partial guarantees from high or ultra-high net worth clients, which partially reduce associated credit risk. At both December 31, 2023 and December 31, 2022, greater than 95% of the CRE loans balance in the Wealth Management business segment received guarantees. All of our lending against CRE properties within Wealth Management are in the Americas region. against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral. Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients. Securities-based lending and Other loans are generally secured by various types of eligible collateral, including marketable securities, private investments, commercial real estate and other financial assets. Residential real estate loans consist of first- and second-lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.", "prior_body": "Institutional Securities Loans Held for Investment—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2022 AtDecember 31,2021 Corporate3.6 %3.0 %Secured lending facilities0.4 %0.5 %Commercial real estate3.2 %2.9 %Other0.4 %0.7 %Total Institutional Securities loans1.3 %1.2 % December 2022 Form 10-K64 December 2022 Form 10-K64 December 2022 Form 10-K64 64 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Wealth Management Loans and Lending Commitments At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estateloans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 At December 31, 20211 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 Residential real estate loans4 10 1,231 42,954 44,199 Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 Lending commitments11,894 2,467 51 282 14,694 Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Allowance for Credit Losses—Loans and Lending Commitments$ in millionsACL—Loans$111 ACL—Lending commitments18 Total at December 31, 2021129 Gross charge-offs(14)Recoveries1 Net (charge-offs) recoveries(13)Provision for credit losses69 Total at December 31, 2022$185 ACL—Loans$165 ACL—Lending commitments20 At December 31, 2022, more than 75% of Wealth Management residential real estate loans were to borrowers with “Exceptional” or “Very Good” FICO scores (i.e., exceeding 740). Additionally, Wealth Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary.Customer and Other ReceivablesMargin and Other Lending$ in millionsAtDecember 31,2022AtDecember 31,2021 Institutional Securities$16,591 $40,545 Wealth Management21,933 30,987 Total$38,524 $71,532 The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” herein. Employee LoansFor information on employee loans and related ACL, see Note 10 to the financial statements. Wealth Management Loans and Lending Commitments At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estateloans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 At December 31, 20211 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 Residential real estate loans4 10 1,231 42,954 44,199 Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 Lending commitments11,894 2,467 51 282 14,694 Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral.Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio." }, { "status": "MODIFIED", "current_title": "Non-Interest Expenses", "prior_title": "Income Tax Items", "similarity_score": 0.726, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Non-interest expenses of $18,183 million in 2023 increased 4% compared with the prior year due to higher Non-compensation expenses and Compensation and benefits expenses.\"", "Reworded sentence: \"As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits.\"", "Reworded sentence: \"Individuals with accounts in multiple plans are counted as participants in each plan.Net RevenuesAsset ManagementAsset management revenues of $14,019 million in 2023 increased 1% compared with the prior year, reflecting the cumulative impact of positive fee-based flows, partially offset by a reduction driven by changes in client and product mix and lower average fee-based client asset levels due to declines in the markets.See “Fee-Based Client Assets Rollforwards” herein.\"", "Reworded sentence: \"As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits.\"" ], "current_body": "($ in millions) •Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation. 2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023. •Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter.", "prior_body": "The effective tax rate of 19.5% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. 31December 2022 Form 10-K 31December 2022 Form 10-K 31December 2022 Form 10-K 31 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Wealth ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management$13,872 $13,966 $10,955 (1)%27 %Transactional12,473 4,259 3,694 (42)%15 %Net interest7,429 5,393 4,022 38 %34 %Other1643 625 415 3 %51 %Net revenues24,417 24,243 19,086 1 %27 %Provision for credit losses69 11 30 N/M(63)%Compensation and benefits12,534 13,090 10,970 (4)%19 %Non-compensation expenses5,231 4,961 3,699 5 %34 %Total non-interest expenses17,765 18,051 14,669 (2)%23 %Income before provision for income taxes6,583 6,181 4,387 7 %41 %Provision for income taxes1,444 1,447 1,026 — %41 %Net income applicable to Morgan Stanley$5,139 $4,734 $3,361 9 %41 %1.Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues.Acquisition of E*TRADEThe comparisons of current year results to prior periods are impacted by the acquisition of E*TRADE on October 2, 2020. For additional information on the acquisition of E*TRADE, see Note 3 to the financial statements.Wealth Management Metrics$ in billionsAt December 31,2022At December 31,2021Total client assets1$4,187$4,989U.S. Bank Subsidiary loans$146$129Margin and other lending2$22$31Deposits3$351$346Annualized weighted average cost of deposits4Period end1.59%0.10%Period average0.53%0.16%202220212020Net new assets5$311.3$437.7$182.71.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. The prior period amount has been revised to conform to the current presentation. See “Self-directed Channel” herein for additional information.2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $6 billion and $9 billion of off-balance sheet deposits as of December 31, 2022 and December 31, 2021, respectively.4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2022 and December 31, 2021. The period average is based on daily balances and rates for the year-to-date period.5.Net new assets represent client asset inflows, including dividends and interest, and asset acquisitions, less client asset outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.Advisor-led Channel$ in billionsAt December 31,2022At December 31,2021Advisor-led client assets1$3,392$3,886Fee-based client assets2$1,678$1,839Fee-based client assets as apercentage of advisor-led clientassets49%47%202220212020Fee-based asset flows3$162.8$179.3$77.41.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.2.Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein.Self-directed Channel$ in billionsAt December 31,2022At December 31,2021Self-directed assets1$795$1,103Self-directed households (in millions)28.07.4202220212020Daily average revenue trades (“DARTs”) (in thousands)38641,1612801.Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. The prior period amount has been revised to include certain additional vested client employee stock options to align the timing of recognition with other existing Morgan Stanley client assets.2.Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts.3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.Workplace Channel1$ in billionsAt December 31,2022At December 31,2021Workplace unvested assets2$302$509Number of participants (in millions)36.35.61.The workplace channel includes equity compensation solutions for companies, their executives and employees.2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 34% and 24% for 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows.3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.Net RevenuesAsset ManagementAsset management revenues of $13,872 million in 2022 were relatively unchanged compared with the prior year, reflecting the impact of lower market levels offset by positive flows on fee-based assets.See “Fee-Based Client Assets Rollforwards” herein.Transactional RevenuesTransactional revenues of $2,473 million in 2022 decreased 42% compared with the prior year, primarily due to losses on Wealth ManagementIncome Statement Information % Change$ in millions20222021202020222021RevenuesAsset management$13,872 $13,966 $10,955 (1)%27 %Transactional12,473 4,259 3,694 (42)%15 %Net interest7,429 5,393 4,022 38 %34 %Other1643 625 415 3 %51 %Net revenues24,417 24,243 19,086 1 %27 %Provision for credit losses69 11 30 N/M(63)%Compensation and benefits12,534 13,090 10,970 (4)%19 %Non-compensation expenses5,231 4,961 3,699 5 %34 %Total non-interest expenses17,765 18,051 14,669 (2)%23 %Income before provision for income taxes6,583 6,181 4,387 7 %41 %Provision for income taxes1,444 1,447 1,026 — %41 %Net income applicable to Morgan Stanley$5,139 $4,734 $3,361 9 %41 %1.Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues.Acquisition of E*TRADEThe comparisons of current year results to prior periods are impacted by the acquisition of E*TRADE on October 2, 2020. For additional information on the acquisition of E*TRADE, see Note 3 to the financial statements.Wealth Management Metrics$ in billionsAt December 31,2022At December 31,2021Total client assets1$4,187$4,989U.S. Bank Subsidiary loans$146$129Margin and other lending2$22$31Deposits3$351$346Annualized weighted average cost of deposits4Period end1.59%0.10%Period average0.53%0.16%202220212020Net new assets5$311.3$437.7$182.71.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. The prior period amount has been revised to conform to the current presentation. See “Self-directed Channel” herein for additional information.2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $6 billion and $9 billion of off-balance sheet deposits as of December 31, 2022 and December 31, 2021, respectively.4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2022 and December 31, 2021. The period average is based on daily balances and rates for the year-to-date period.5.Net new assets represent client asset inflows, including dividends and interest, and asset acquisitions, less client asset outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions." }, { "status": "MODIFIED", "current_title": "Total Assets by Business Segment", "prior_title": "Total Assets by Business Segment", "similarity_score": 0.726, "confidence": "medium", "key_changes": [ "Reworded sentence: \"At December 31, 2023$ in millionsISWMIMTotalAssetsCash and cash equivalents$72,928 $16,172 $132 $89,232 Trading assets at fair value353,841 7,962 5,271 367,074 Investment securities39,212 115,595 — 154,807 Securities purchased under agreements to resell90,701 20,039 — 110,740 Securities borrowed119,823 1,268 — 121,091 Customer and other receivables47,333 31,237 1,535 80,105 Loans172,110 146,526 4 218,640 Goodwill424 10,199 6,084 16,707 Intangible assets26 3,427 3,602 7,055 Other assets214,108 12,743 1,391 28,242 Total assets$810,506 $365,168 $18,019 $1,193,693 Loans1 Goodwill Intangible assets Other assets2 At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 — 159,931 Securities purchased under agreements to resell102,511 11,396 — 113,907 Securities borrowed132,619 755 — 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Goodwill429 10,202 6,021 16,652 Intangible assets36 3,911 3,671 7,618 Other assets215,324 10,356 1,302 26,982 Total assets$789,837 $373,305 $17,089 $1,180,231 Loans1 Goodwill Intangible assets Other assets2 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements).\"", "Reworded sentence: \"Total assets of $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022.Liquidity Risk Management FrameworkThe primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons.\"", "Reworded sentence: \"The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets; $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022.\"" ], "current_body": "At December 31, 2023$ in millionsISWMIMTotalAssetsCash and cash equivalents$72,928 $16,172 $132 $89,232 Trading assets at fair value353,841 7,962 5,271 367,074 Investment securities39,212 115,595 — 154,807 Securities purchased under agreements to resell90,701 20,039 — 110,740 Securities borrowed119,823 1,268 — 121,091 Customer and other receivables47,333 31,237 1,535 80,105 Loans172,110 146,526 4 218,640 Goodwill424 10,199 6,084 16,707 Intangible assets26 3,427 3,602 7,055 Other assets214,108 12,743 1,391 28,242 Total assets$810,506 $365,168 $18,019 $1,193,693 Loans1 Goodwill Intangible assets Other assets2 At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 — 159,931 Securities purchased under agreements to resell102,511 11,396 — 113,907 Securities borrowed132,619 755 — 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Goodwill429 10,202 6,021 16,652 Intangible assets36 3,911 3,671 7,618 Other assets215,324 10,356 1,302 26,982 Total assets$789,837 $373,305 $17,089 $1,180,231 Loans1 Goodwill Intangible assets Other assets2 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements). 2.Other assets primarily includes premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets. A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022.Liquidity Risk Management FrameworkThe primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.The following principles guide our Liquidity Risk Management Framework:•Sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) should be maintained to cover maturing liabilities and other planned and contingent outflows;•Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;•Source, counterparty, currency, region and term of funding should be diversified; and•Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding.The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.Required Liquidity FrameworkOur Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.Liquidity Stress TestsWe use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets; $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022.", "prior_body": "At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 — 159,931 Securities purchased under agreements to resell102,511 11,396 — 113,907 Securities borrowed132,619 755 — 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Other assets215,789 24,469 10,994 51,252 Total assets$789,837 $373,305 $17,089 $1,180,231 Loans1 Other assets2 41December 2022 Form 10-K 41December 2022 Form 10-K 41December 2022 Form 10-K 41 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents At December 31, 2021$ in millionsISWMIMTotalAssetsCash and cash equivalents$91,251 $36,003 $471 $127,725 Trading assets at fair value288,405 1,921 4,543 294,869 Investment securities41,407 141,591 — 182,998 Securities purchased under agreements to resell112,267 7,732 — 119,999 Securities borrowed128,154 1,559 — 129,713 Customer and other receivables57,009 37,643 1,366 96,018 Loans158,822 129,307 5 188,134 Other assets214,820 22,682 11,182 48,684 Total assets$792,135 $378,438 $17,567 $1,188,140 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 10 to the financial statements).2.Other assets primarily includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets.A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,180 billion at December 31, 2022 were relatively unchanged from $1,188 billion at December 31, 2021.Liquidity Risk Management FrameworkThe primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.The following principles guide our Liquidity Risk Management Framework:•Sufficient Liquidity Resources should be maintained to cover maturing liabilities and other planned and contingent outflows;•Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;•Source, counterparty, currency, region and term of funding should be diversified; and•Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding.The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.Required Liquidity FrameworkOur Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.Liquidity Stress TestsWe use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets;•Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.At December 31, 2022 and December 31, 2021, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests. At December 31, 2021$ in millionsISWMIMTotalAssetsCash and cash equivalents$91,251 $36,003 $471 $127,725 Trading assets at fair value288,405 1,921 4,543 294,869 Investment securities41,407 141,591 — 182,998 Securities purchased under agreements to resell112,267 7,732 — 119,999 Securities borrowed128,154 1,559 — 129,713 Customer and other receivables57,009 37,643 1,366 96,018 Loans158,822 129,307 5 188,134 Other assets214,820 22,682 11,182 48,684 Total assets$792,135 $378,438 $17,567 $1,188,140 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 10 to the financial statements).2.Other assets primarily includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets.A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,180 billion at December 31, 2022 were relatively unchanged from $1,188 billion at December 31, 2021.Liquidity Risk Management FrameworkThe primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.The following principles guide our Liquidity Risk Management Framework:•Sufficient Liquidity Resources should be maintained to cover maturing liabilities and other planned and contingent outflows;•Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;•Source, counterparty, currency, region and term of funding should be diversified; and•Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding.The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.Required Liquidity FrameworkOur Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability At December 31, 2021$ in millionsISWMIMTotalAssetsCash and cash equivalents$91,251 $36,003 $471 $127,725 Trading assets at fair value288,405 1,921 4,543 294,869 Investment securities41,407 141,591 — 182,998 Securities purchased under agreements to resell112,267 7,732 — 119,999 Securities borrowed128,154 1,559 — 129,713 Customer and other receivables57,009 37,643 1,366 96,018 Loans158,822 129,307 5 188,134 Other assets214,820 22,682 11,182 48,684 Total assets$792,135 $378,438 $17,567 $1,188,140 Loans1 Other assets2 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 10 to the financial statements). 2.Other assets primarily includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets. A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,180 billion at December 31, 2022 were relatively unchanged from $1,188 billion at December 31, 2021." }, { "status": "MODIFIED", "current_title": "Selected Non-GAAP Financial Information", "prior_title": "Selected Non-GAAP Financial Information", "similarity_score": 0.719, "confidence": "medium", "key_changes": [ "Reworded sentence: \"From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures.\"", "Reworded sentence: \"We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses.\"", "Reworded sentence: \"For additional information on DCP, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables.\"", "Removed sentence: \"25December 2022 Form 10-K 25December 2022 Form 10-K 25December 2022 Form 10-K 25 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Reconciliations from U.S.\"", "Removed sentence: \"GAAP to Non-GAAP Consolidated Financial Measures$ in millions, except per share data202220212020Net revenues$53,668 $59,755 $48,757 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans11,198 (389)(823)Adjusted Net revenues—non-GAAP$54,866 $59,366 $47,934 Compensation expense$23,053 $24,628 $20,854 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1716 (526)(856)Adjusted Compensation expense—non-GAAP$23,769 $24,102 $19,998 Wealth Management Net revenues$24,417 $24,243 $19,086 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1858 (210)(563)Adjusted Wealth Management Net revenues—non-GAAP$25,275 $24,033 $18,523 Wealth Management Compensation expense$12,534 $13,090 $10,970 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1530 (293)(516)Adjusted Wealth Management Compensation expense—non-GAAP$13,064 $12,797 $10,454 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Impact of adjustments:Wealth Management—Compensation expenses12 58 151 Wealth Management—Non-compensation expenses345 288 80 Investment Management—Compensation expenses29 44 — Investment Management—Non-compensation expenses84 66 — Total integration-related expenses470 456 231 Related tax benefit(110)(104)(42)Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP2$10,900 $14,918 $10,689 Earnings per diluted common share$6.15 $8.03 $6.46 Impact of adjustments0.21 0.19 0.12 Adjusted earnings per diluted common share—non-GAAP2$6.36 $8.22 $6.58 Expense efficiency ratio73 %67 %69 %Impact of adjustments(1)%(1)%(1)%Adjusted expense efficiency ratio—non-GAAP272 %66 %68 %Wealth Management pre-tax margin27 %25 %23 %Impact of adjustments1 %2 %1 %Adjusted Wealth Management pre-tax margin—non-GAAP228 %27 %24 %Investment Management pre-tax margin15 %27 %23 %Impact of adjustments2 %2 %— %Adjusted Investment Management pre-tax margin—non-GAAP217 %29 %23 %At December 31,$ in millions202220212020Tangible equityCommon shareholders’ equity$91,391 $97,691 $92,531 Less: Goodwill and net intangible assets(24,268)(25,192)(16,615)Tangible common shareholders’ equity—non-GAAP$67,123 $72,499 $75,916 Average Monthly Balance$ in millions202220212020Tangible equityCommon shareholders’ equity$93,873 $97,094 $80,246 Less: Goodwill and net intangible assets(24,789)(23,392)(10,951)Tangible common shareholders’ equity—non-GAAP$69,084 $73,702 $69,295 $ in billions202220212020Average common equityUnadjusted—GAAP$93.9 $97.1 $80.2 Adjusted2—Non-GAAP94.0 97.2 80.3 ROE3Unadjusted—GAAP11.2 %15.0 %13.1 %Adjusted2—Non-GAAP11.6 %15.3 %13.3 %Average tangible common equity—Non-GAAPUnadjusted$69.1 $73.7 $69.3 Adjusted269.3 73.8 69.3 ROTCE3—Non-GAAPUnadjusted15.3 %19.8 %15.2 %Adjusted215.7 %20.2 %15.4 %Non-GAAP Financial Measures by Business Segment$ in billions202220212020Average common equity4Institutional Securities$48.8 $43.5 $42.8 Wealth Management31.0 28.6 20.8 Investment Management10.6 8.8 2.6 ROE5Institutional Securities10 %20 %15 %Wealth Management16 %16 %16 %Investment Management6 %15 %23 %Average tangible common equity4Institutional Securities$48.3 $42.9 $42.3 Wealth Management16.3 13.4 11.3 Investment Management0.8 0.9 1.7 ROTCE5Institutional Securities10 %20 %16 %Wealth Management31 %34 %29 %Investment Management86 %144 %36 %1.Net revenues and compensation expense are adjusted for certain employee deferred cash-based compensation plans for both Firm and Wealth Management business segment.\"" ], "current_body": "We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards. We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on DCP, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables. Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures$ in millions202320222021Net revenues$54,143 $53,668 $59,755 Adjustment for mark-to-market losses (gains) on DCP1(434)1,198 (389)Adjusted Net revenues—non-GAAP$53,709 $54,866 $59,366 Compensation expense$24,558 $23,053 $24,628 Adjustment for mark-to-market losses (gains) on DCP1(668)716 (526)Adjusted Compensation expense—non-GAAP$23,890 $23,769 $24,102 Wealth Management Net revenues$26,268 $24,417 $24,243 Adjustment for mark-to-market losses (gains) on DCP1(282)858 (210)Adjusted Wealth Management Net revenues—non-GAAP$25,986 $25,275 $24,033 Wealth Management Compensation expense$13,972 $12,534 $13,090 Adjustment for mark-to-market losses (gains) on DCP1(412)530 (293)Adjusted Wealth Management Compensation expense—non-GAAP$13,560 $13,064 $12,797 At December 31,$ in millions202320222021Tangible equityCommon shareholders’ equity$90,288 $91,391 $97,691 Less: Goodwill and net intangible assets(23,761)(24,268)(25,192)Tangible common shareholders’ equity—non-GAAP$66,527 $67,123 $72,499 Average Monthly Balance$ in millions202320222021Tangible equityCommon shareholders’ equity$90,819 $93,873 $97,094 Less: Goodwill and net intangible assets(24,013)(24,789)(23,392)Tangible common shareholders’ equity—non-GAAP$66,806 $69,084 $73,702 may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on DCP, refer to “Other Matters” herein. The principal non-GAAP financial measures presented in this document are set forth in the following tables.", "prior_body": "We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statement and otherwise. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. In the fourth quarter of 2022, we introduced new non-GAAP financial measures. These measures exclude the impact of mark-to-market gains and losses on investments associated with certain employee deferred cash-based compensation plans from net revenues and compensation expenses. These employee deferred cash-based compensation plans are primarily reflected in our Wealth Management business segment. We consider these new measures useful for analysts, investors, and other stakeholders to allow better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.We invest directly, as a principal, in financial instruments and other investments to economically hedge certain of our obligations under these deferred cash-based compensation plans. Changes in the fair value of such investments, net of financing costs, are recorded in Net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on deferred cash-based compensation, refer to “Other Matters” herein.The principal non-GAAP financial measures presented in this document are set forth in the following tables. referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards. We invest directly, as a principal, in financial instruments and other investments to economically hedge certain of our obligations under these deferred cash-based compensation plans. Changes in the fair value of such investments, net of financing costs, are recorded in Net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on deferred cash-based compensation, refer to “Other Matters” herein. The principal non-GAAP financial measures presented in this document are set forth in the following tables. 25December 2022 Form 10-K 25December 2022 Form 10-K 25December 2022 Form 10-K 25 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures$ in millions, except per share data202220212020Net revenues$53,668 $59,755 $48,757 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans11,198 (389)(823)Adjusted Net revenues—non-GAAP$54,866 $59,366 $47,934 Compensation expense$23,053 $24,628 $20,854 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1716 (526)(856)Adjusted Compensation expense—non-GAAP$23,769 $24,102 $19,998 Wealth Management Net revenues$24,417 $24,243 $19,086 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1858 (210)(563)Adjusted Wealth Management Net revenues—non-GAAP$25,275 $24,033 $18,523 Wealth Management Compensation expense$12,534 $13,090 $10,970 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1530 (293)(516)Adjusted Wealth Management Compensation expense—non-GAAP$13,064 $12,797 $10,454 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Impact of adjustments:Wealth Management—Compensation expenses12 58 151 Wealth Management—Non-compensation expenses345 288 80 Investment Management—Compensation expenses29 44 — Investment Management—Non-compensation expenses84 66 — Total integration-related expenses470 456 231 Related tax benefit(110)(104)(42)Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP2$10,900 $14,918 $10,689 Earnings per diluted common share$6.15 $8.03 $6.46 Impact of adjustments0.21 0.19 0.12 Adjusted earnings per diluted common share—non-GAAP2$6.36 $8.22 $6.58 Expense efficiency ratio73 %67 %69 %Impact of adjustments(1)%(1)%(1)%Adjusted expense efficiency ratio—non-GAAP272 %66 %68 %Wealth Management pre-tax margin27 %25 %23 %Impact of adjustments1 %2 %1 %Adjusted Wealth Management pre-tax margin—non-GAAP228 %27 %24 %Investment Management pre-tax margin15 %27 %23 %Impact of adjustments2 %2 %— %Adjusted Investment Management pre-tax margin—non-GAAP217 %29 %23 %At December 31,$ in millions202220212020Tangible equityCommon shareholders’ equity$91,391 $97,691 $92,531 Less: Goodwill and net intangible assets(24,268)(25,192)(16,615)Tangible common shareholders’ equity—non-GAAP$67,123 $72,499 $75,916 Average Monthly Balance$ in millions202220212020Tangible equityCommon shareholders’ equity$93,873 $97,094 $80,246 Less: Goodwill and net intangible assets(24,789)(23,392)(10,951)Tangible common shareholders’ equity—non-GAAP$69,084 $73,702 $69,295 $ in billions202220212020Average common equityUnadjusted—GAAP$93.9 $97.1 $80.2 Adjusted2—Non-GAAP94.0 97.2 80.3 ROE3Unadjusted—GAAP11.2 %15.0 %13.1 %Adjusted2—Non-GAAP11.6 %15.3 %13.3 %Average tangible common equity—Non-GAAPUnadjusted$69.1 $73.7 $69.3 Adjusted269.3 73.8 69.3 ROTCE3—Non-GAAPUnadjusted15.3 %19.8 %15.2 %Adjusted215.7 %20.2 %15.4 %Non-GAAP Financial Measures by Business Segment$ in billions202220212020Average common equity4Institutional Securities$48.8 $43.5 $42.8 Wealth Management31.0 28.6 20.8 Investment Management10.6 8.8 2.6 ROE5Institutional Securities10 %20 %15 %Wealth Management16 %16 %16 %Investment Management6 %15 %23 %Average tangible common equity4Institutional Securities$48.3 $42.9 $42.3 Wealth Management16.3 13.4 11.3 Investment Management0.8 0.9 1.7 ROTCE5Institutional Securities10 %20 %16 %Wealth Management31 %34 %29 %Investment Management86 %144 %36 %1.Net revenues and compensation expense are adjusted for certain employee deferred cash-based compensation plans for both Firm and Wealth Management business segment. See “Other Matters” herein for more information.2.Adjusted amounts exclude the effect of costs related to the integrations of E*TRADE and Eaton Vance, net of tax as appropriate. 3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted.4.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see \"Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity. 5.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment. Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures$ in millions, except per share data202220212020Net revenues$53,668 $59,755 $48,757 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans11,198 (389)(823)Adjusted Net revenues—non-GAAP$54,866 $59,366 $47,934 Compensation expense$23,053 $24,628 $20,854 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1716 (526)(856)Adjusted Compensation expense—non-GAAP$23,769 $24,102 $19,998 Wealth Management Net revenues$24,417 $24,243 $19,086 Adjustment for mark-to-market losses (gains) on certain employee deferred cash-based compensation plans1858 (210)(563)Adjusted Wealth Management Net revenues—non-GAAP$25,275 $24,033 $18,523 Wealth Management Compensation expense$12,534 $13,090 $10,970 Adjustment for mark-to-market gains (losses) on certain employee deferred cash-based compensation plans1530 (293)(516)Adjusted Wealth Management Compensation expense—non-GAAP$13,064 $12,797 $10,454 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Impact of adjustments:Wealth Management—Compensation expenses12 58 151 Wealth Management—Non-compensation expenses345 288 80 Investment Management—Compensation expenses29 44 — Investment Management—Non-compensation expenses84 66 — Total integration-related expenses470 456 231 Related tax benefit(110)(104)(42)Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP2$10,900 $14,918 $10,689 Earnings per diluted common share$6.15 $8.03 $6.46 Impact of adjustments0.21 0.19 0.12 Adjusted earnings per diluted common share—non-GAAP2$6.36 $8.22 $6.58 Expense efficiency ratio73 %67 %69 %Impact of adjustments(1)%(1)%(1)%Adjusted expense efficiency ratio—non-GAAP272 %66 %68 %Wealth Management pre-tax margin27 %25 %23 %Impact of adjustments1 %2 %1 %Adjusted Wealth Management pre-tax margin—non-GAAP228 %27 %24 %Investment Management pre-tax margin15 %27 %23 %Impact of adjustments2 %2 %— %Adjusted Investment Management pre-tax margin—non-GAAP217 %29 %23 %At December 31,$ in millions202220212020Tangible equityCommon shareholders’ equity$91,391 $97,691 $92,531 Less: Goodwill and net intangible assets(24,268)(25,192)(16,615)Tangible common shareholders’ equity—non-GAAP$67,123 $72,499 $75,916" }, { "status": "MODIFIED", "current_title": "The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.", "prior_title": "The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.", "similarity_score": 0.718, "confidence": "medium", "key_changes": [ "Reworded sentence: \"federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions and disclosure regimes.\"", "Reworded sentence: \"The application of regulatory requirements and strategies in the U.S.\"", "Reworded sentence: \"If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if we were unsuccessful in addressing any deficiencies identified by the regulators, we or any of our subsidiaries may be subject to more stringent capital, leverage, or liquidity requirements or restrictions on our growth, activities or operations, or after a two-year period, we may be required to divest assets or operations.In addition, provided that certain procedures are met, we can be subject to a resolution proceeding under the orderly liquidation authority under Title II of the Dodd-Frank Act with the FDIC being appointed as receiver instead of being resolved under the U.S.\"", "Removed sentence: \"Legal and regulatory requirements continue to be subject to ongoing interpretation and change, which may result in significant new costs to comply with new or revised requirements, as well as to monitor for compliance on an ongoing basis.\"" ], "current_body": "Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions and disclosure regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments. The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, December 2023 Form 10-K18 December 2023 Form 10-K18 December 2023 Form 10-K18 18 Table of Contents Table of Contents Table of Contents resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, interest rate benchmark requirements, commodities regulation, market structure regulation, consumer protection regulation, tax regulations and interpretations, antitrust laws, trade and transaction reporting obligations, broadened fiduciary obligations and disclosure requirements.New laws, rules, regulations and guidelines, as well as ongoing implementation of, our efforts to comply with, and/or changes to laws, rules, regulations and guidelines, including changes in the breadth, application, interpretation or enforcement of laws, rules, regulations and guidelines, could materially impact the profitability of our businesses and the value of assets we hold, impact our income tax provision and effective tax rate, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors.In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us. The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if we were unsuccessful in addressing any deficiencies identified by the regulators, we or any of our subsidiaries may be subject to more stringent capital, leverage, or liquidity requirements or restrictions on our growth, activities or operations, or after a two-year period, we may be required to divest assets or operations.In addition, provided that certain procedures are met, we can be subject to a resolution proceeding under the orderly liquidation authority under Title II of the Dodd-Frank Act with the FDIC being appointed as receiver instead of being resolved under the U.S. Bankruptcy Code. The FDIC’s power under the orderly liquidation authority to disregard the priority of creditor claims and treat similarly situated creditors differently in certain circumstances, subject to certain limitations, could adversely impact holders of our unsecured debt. See “Business—Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements.”Further, because both our resolution plan contemplates an SPOE strategy under the U.S. Bankruptcy Code and the FDIC has proposed an SPOE strategy through which it may apply its orderly liquidation authority powers, we believe that the application of an SPOE strategy is the reasonably likely outcome if either our resolution plan were implemented or a resolution proceeding were commenced under the orderly liquidation authority. An SPOE strategy generally contemplates the provision of adequate capital and liquidity by the Parent Company to certain of its subsidiaries so that such subsidiaries have the resources necessary to implement the resolution strategy, and the Parent Company has entered into a secured amended and restated support agreement with such entities, pursuant to which it would provide such capital and liquidity to such entities.In addition, a wholly owned, direct subsidiary of the Parent Company, Morgan Stanley Holdings LLC (“Funding IHC”), serves as a resolution funding vehicle. The Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to the Funding IHC. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its material assets that can be contributed under the terms of the amended and restated support agreement (other than shares in subsidiaries of the Parent Company and certain other assets) to the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to certain supported subsidiaries, pursuant to the terms of the secured amended and restated support agreement.The obligations of the Parent Company and of the Funding IHC, respectively, under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets), and the assets of the Funding IHC, as applicable. As a result, claims of certain supported subsidiaries, including the Funding IHC, against the assets of the Parent Company with respect to such secured assets are effectively senior to unsecured obligations of the Parent Company.Although an SPOE strategy, whether applied pursuant to our resolution plan or in a resolution proceeding under the orderly liquidation authority, is intended to result in better outcomes for creditors overall, there is no guarantee that the application of an SPOE strategy, including the provision of support to the Parent Company’s supported subsidiaries pursuant to the secured amended and restated support agreement, will not result in greater losses for holders of our securities compared with a different resolution strategy for us.Regulators have taken and proposed various actions to facilitate an SPOE strategy under the U.S. Bankruptcy Code, resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, interest rate benchmark requirements, commodities regulation, market structure regulation, consumer protection regulation, tax regulations and interpretations, antitrust laws, trade and transaction reporting obligations, broadened fiduciary obligations and disclosure requirements.New laws, rules, regulations and guidelines, as well as ongoing implementation of, our efforts to comply with, and/or changes to laws, rules, regulations and guidelines, including changes in the breadth, application, interpretation or enforcement of laws, rules, regulations and guidelines, could materially impact the profitability of our businesses and the value of assets we hold, impact our income tax provision and effective tax rate, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors.In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us. The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if we were unsuccessful in addressing any deficiencies identified by the regulators, we or any of our subsidiaries may be subject to more stringent capital, leverage, or liquidity requirements or restrictions on our growth, activities or operations, or after a two-year period, we may be required to divest assets or operations.In addition, provided that certain procedures are met, we can be subject to a resolution proceeding under the orderly liquidation authority under Title II of the Dodd-Frank Act with the FDIC being appointed as receiver instead of being resolved under the U.S. Bankruptcy Code. The FDIC’s power under the orderly liquidation authority to disregard the priority of creditor claims and treat similarly situated creditors differently in certain circumstances, subject to certain limitations, could adversely impact holders of our unsecured resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, interest rate benchmark requirements, commodities regulation, market structure regulation, consumer protection regulation, tax regulations and interpretations, antitrust laws, trade and transaction reporting obligations, broadened fiduciary obligations and disclosure requirements. New laws, rules, regulations and guidelines, as well as ongoing implementation of, our efforts to comply with, and/or changes to laws, rules, regulations and guidelines, including changes in the breadth, application, interpretation or enforcement of laws, rules, regulations and guidelines, could materially impact the profitability of our businesses and the value of assets we hold, impact our income tax provision and effective tax rate, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors. In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us.", "prior_body": "Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments.The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on new activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, commodities regulation, market structure regulation, consumer protection regulation, tax regulations, antitrust laws, trade and transaction reporting obligations, and broadened fiduciary obligations.Ongoing implementation of, our efforts to comply with, and/or changes to laws and regulations, including changes in the breadth, application, interpretation or enforcement of laws and regulations, could materially impact the profitability of our businesses and the value of assets we hold, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors.In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us. Legal and regulatory requirements continue to be subject to ongoing interpretation and change, which may result in significant new costs to comply with new or revised requirements, as well as to monitor for compliance on an ongoing basis.The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments. The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on new activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, resolution regimes and resolution planning requirements, requirements for maintaining minimum amounts of TLAC and external long-term debt, restrictions on activities and investments imposed by the Volcker Rule, comprehensive derivatives regulation, commodities regulation, market structure regulation, consumer protection regulation, tax regulations, antitrust laws, trade and transaction reporting obligations, and broadened fiduciary obligations. Ongoing implementation of, our efforts to comply with, and/or changes to laws and regulations, including changes in the breadth, application, interpretation or enforcement of laws and regulations, could materially impact the profitability of our businesses and the value of assets we hold, expose us to additional theories of liability and additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock or require us to raise capital, including in ways that may adversely impact our shareholders or creditors. In addition, regulatory requirements that are imposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and may adversely affect us. Legal and regulatory requirements continue to be subject to ongoing interpretation and change, which may result in significant new costs to comply with new or revised requirements, as well as to monitor for compliance on an ongoing basis." }, { "status": "MODIFIED", "current_title": "Net New Assets (NNA)", "prior_title": "Wealth Management Metrics", "similarity_score": 0.71, "confidence": "medium", "key_changes": [ "Reworded sentence: \"NNA represent client asset inflows, inclusive of interest, dividends and asset acquisitions, less client asset outflows, and exclude the impact of business combinations/divestitures and the impact of fees and commissions.\"", "Reworded sentence: \"Individuals with accounts in multiple plans are counted as participants in each plan.Net RevenuesAsset ManagementAsset management revenues of $14,019 million in 2023 increased 1% compared with the prior year, reflecting the cumulative impact of positive fee-based flows, partially offset by a reduction driven by changes in client and product mix and lower average fee-based client asset levels due to declines in the markets.See “Fee-Based Client Assets Rollforwards” herein.\"" ], "current_body": "NNA represent client asset inflows, inclusive of interest, dividends and asset acquisitions, less client asset outflows, and exclude the impact of business combinations/divestitures and the impact of fees and commissions. The level of NNA in a given period is influenced by a variety of factors, including macroeconomic factors that impact client investment and spending behaviors, our ability to attract and retain financial advisors and clients, and timing of large idiosyncratic flows. Macroeconomic factors have had an impact on our NNA in recent periods. Should these factors continue, the growth rate of our NNA may be impacted.Advisor-Led Channel$ in billionsAt December 31,2023At December 31,2022Advisor-led client assets1$3,979$3,392Fee-based client assets2$1,983$1,678Fee-based client assets as apercentage of advisor-led clientassets50%49%202320222021Fee-based asset flows3$109.2$162.8$179.31.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.2.Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein.Self-Directed ChannelAt December 31,2023At December 31,2022Self-directed assets (in billions)1$1,150$795Self-directed households (in millions)28.18.0202320222021Daily average revenue trades (“DARTs”) (in thousands)37598641,1611.Self-directed client assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.2.Self-directed households represent the total number of households that include at least one active account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts.3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.Workplace Channel1At December 31,2023At December 31,2022Workplace unvested assets (in billions)2$416$302Number of participants (in millions)36.66.31.The workplace channel includes equity compensation solutions for companies, their executives and employees.2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 29%, 34% and 24% for 2023, 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows.3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.Net RevenuesAsset ManagementAsset management revenues of $14,019 million in 2023 increased 1% compared with the prior year, reflecting the cumulative impact of positive fee-based flows, partially offset by a reduction driven by changes in client and product mix and lower average fee-based client asset levels due to declines in the markets.See “Fee-Based Client Assets Rollforwards” herein. recent periods. Should these factors continue, the growth rate of our NNA may be impacted.", "prior_body": "$ in billionsAt December 31,2022At December 31,2021Total client assets1$4,187$4,989U.S. Bank Subsidiary loans$146$129Margin and other lending2$22$31Deposits3$351$346Annualized weighted average cost of deposits4Period end1.59%0.10%Period average0.53%0.16% Total client assets1 Margin and other lending2 Deposits3 Annualized weighted average cost of deposits4 202220212020Net new assets5$311.3$437.7$182.7 Net new assets5 1.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. The prior period amount has been revised to conform to the current presentation. See “Self-directed Channel” herein for additional information. 2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities. 3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $6 billion and $9 billion of off-balance sheet deposits as of December 31, 2022 and December 31, 2021, respectively. 4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2022 and December 31, 2021. The period average is based on daily balances and rates for the year-to-date period. 5.Net new assets represent client asset inflows, including dividends and interest, and asset acquisitions, less client asset outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions. Advisor-led Channel$ in billionsAt December 31,2022At December 31,2021Advisor-led client assets1$3,392$3,886Fee-based client assets2$1,678$1,839Fee-based client assets as apercentage of advisor-led clientassets49%47%202220212020Fee-based asset flows3$162.8$179.3$77.41.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.2.Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein.Self-directed Channel$ in billionsAt December 31,2022At December 31,2021Self-directed assets1$795$1,103Self-directed households (in millions)28.07.4202220212020Daily average revenue trades (“DARTs”) (in thousands)38641,1612801.Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. The prior period amount has been revised to include certain additional vested client employee stock options to align the timing of recognition with other existing Morgan Stanley client assets.2.Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts.3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.Workplace Channel1$ in billionsAt December 31,2022At December 31,2021Workplace unvested assets2$302$509Number of participants (in millions)36.35.61.The workplace channel includes equity compensation solutions for companies, their executives and employees.2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 34% and 24% for 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows.3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.Net RevenuesAsset ManagementAsset management revenues of $13,872 million in 2022 were relatively unchanged compared with the prior year, reflecting the impact of lower market levels offset by positive flows on fee-based assets.See “Fee-Based Client Assets Rollforwards” herein.Transactional RevenuesTransactional revenues of $2,473 million in 2022 decreased 42% compared with the prior year, primarily due to losses on" }, { "status": "MODIFIED", "current_title": "Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures", "prior_title": "Average tangible common equity4", "similarity_score": 0.707, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in millions202320222021Net revenues$54,143 $53,668 $59,755 Adjustment for mark-to-market losses (gains) on DCP1(434)1,198 (389)Adjusted Net revenues—non-GAAP$53,709 $54,866 $59,366 Compensation expense$24,558 $23,053 $24,628 Adjustment for mark-to-market losses (gains) on DCP1(668)716 (526)Adjusted Compensation expense—non-GAAP$23,890 $23,769 $24,102 Wealth Management Net revenues$26,268 $24,417 $24,243 Adjustment for mark-to-market losses (gains) on DCP1(282)858 (210)Adjusted Wealth Management Net revenues—non-GAAP$25,986 $25,275 $24,033 Wealth Management Compensation expense$13,972 $12,534 $13,090 Adjustment for mark-to-market losses (gains) on DCP1(412)530 (293)Adjusted Wealth Management Compensation expense—non-GAAP$13,560 $13,064 $12,797 $ in millions Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 At December 31,$ in millions202320222021Tangible equityCommon shareholders’ equity$90,288 $91,391 $97,691 Less: Goodwill and net intangible assets(23,761)(24,268)(25,192)Tangible common shareholders’ equity—non-GAAP$66,527 $67,123 $72,499 Average Monthly Balance$ in millions202320222021Tangible equityCommon shareholders’ equity$90,819 $93,873 $97,094 Less: Goodwill and net intangible assets(24,013)(24,789)(23,392)Tangible common shareholders’ equity—non-GAAP$66,806 $69,084 $73,702 December 2023 Form 10-K32 December 2023 Form 10-K32 December 2023 Form 10-K32 32 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Non-GAAP Financial Measures by Business Segment$ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %1.Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment.\"", "Reworded sentence: \"See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to DCP.\"", "Reworded sentence: \"Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments.\"", "Reworded sentence: \"See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.\"" ], "current_body": "$ in millions202320222021Net revenues$54,143 $53,668 $59,755 Adjustment for mark-to-market losses (gains) on DCP1(434)1,198 (389)Adjusted Net revenues—non-GAAP$53,709 $54,866 $59,366 Compensation expense$24,558 $23,053 $24,628 Adjustment for mark-to-market losses (gains) on DCP1(668)716 (526)Adjusted Compensation expense—non-GAAP$23,890 $23,769 $24,102 Wealth Management Net revenues$26,268 $24,417 $24,243 Adjustment for mark-to-market losses (gains) on DCP1(282)858 (210)Adjusted Wealth Management Net revenues—non-GAAP$25,986 $25,275 $24,033 Wealth Management Compensation expense$13,972 $12,534 $13,090 Adjustment for mark-to-market losses (gains) on DCP1(412)530 (293)Adjusted Wealth Management Compensation expense—non-GAAP$13,560 $13,064 $12,797 $ in millions Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 Adjustment for mark-to-market losses (gains) on DCP1 At December 31,$ in millions202320222021Tangible equityCommon shareholders’ equity$90,288 $91,391 $97,691 Less: Goodwill and net intangible assets(23,761)(24,268)(25,192)Tangible common shareholders’ equity—non-GAAP$66,527 $67,123 $72,499 Average Monthly Balance$ in millions202320222021Tangible equityCommon shareholders’ equity$90,819 $93,873 $97,094 Less: Goodwill and net intangible assets(24,013)(24,789)(23,392)Tangible common shareholders’ equity—non-GAAP$66,806 $69,084 $73,702 December 2023 Form 10-K32 December 2023 Form 10-K32 December 2023 Form 10-K32 32 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Non-GAAP Financial Measures by Business Segment$ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %1.Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. See “Other Matters” herein for more information.2.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity. 3.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.Return on Tangible Common Equity GoalWe have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors. See “Risk Factors” and “Forward-Looking Statements” herein for further information on market and economic conditions and their potential effects on our future operating results.ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.Business SegmentsSubstantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to DCP. Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to:•taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time;•building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants;•managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks;•trading in the market to remain current on pricing and trends; and•engaging in other activities to provide efficiency and liquidity for markets.In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to DCP investments. Non-GAAP Financial Measures by Business Segment$ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %1.Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. See “Other Matters” herein for more information.2.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity. 3.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.Return on Tangible Common Equity GoalWe have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors. See “Risk Factors” and “Forward-Looking Statements” herein for further information on market and economic conditions and their potential effects on our future operating results.ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.Business SegmentsSubstantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.", "prior_body": "ROTCE5 1.Net revenues and compensation expense are adjusted for certain employee deferred cash-based compensation plans for both Firm and Wealth Management business segment. See “Other Matters” herein for more information. 2.Adjusted amounts exclude the effect of costs related to the integrations of E*TRADE and Eaton Vance, net of tax as appropriate. 3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted. 4.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see \"Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity. 5.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment. December 2022 Form 10-K26 December 2022 Form 10-K26 December 2022 Form 10-K26 26 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Return on Tangible Common Equity GoalWe have an ROTCE goal of over 20%. Our ROTCE goal is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors. See “Risk Factors” herein for further information on market and economic conditions and their potential effects on our future operating results.For further information on non-GAAP measures (ROTCE excluding integration-related expenses), see “Selected Non-GAAP Financial Information” herein.Business SegmentsSubstantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 23 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.The global economic and geopolitical environment in 2022 was characterized by elevated inflation, rising interest rates and volatility in global financial markets and these factors have continued into 2023. This environment has impacted our businesses, as discussed further herein.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to certain employee deferred compensation plans.Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and derivatives in which we act as a market maker for our clients. In this role, we stand ready to buy, sell or otherwise transact with customers under a variety of market conditions and to provide firm or indicative prices in response to customer requests. Our liquidity obligations can be explicit in some cases, and in others, customers expect us to be willing to transact with them. In order to most effectively fulfill our market-making function, we engage in activities across all of our trading businesses that include, but are not limited to:•taking positions in anticipation of, and in response to, customer demand to buy or sell and—depending on the liquidity of the relevant market and the size of the position—to hold those positions for a period of time;•building, maintaining and rebalancing inventory held to facilitate client activity through trades with other market participants;•managing and assuming basis risk (risk associated with imperfect hedging) between risks incurred from the facilitation of client transactions and the standardized products available in the market to hedge those risks;•trading in the market to remain current on pricing and trends; and•engaging in other activities to provide efficiency and liquidity for markets.In many markets, the realized and unrealized gains and losses from purchase and sale transactions will include any spreads between bids and offers. Certain fees received on loans carried at fair value and dividends from equity securities are also recorded in Trading revenues since they relate to positions carried at fair value.Within the Wealth Management business segment, Trading revenues primarily include revenues from customers’ purchases and sales of fixed income instruments in which we act as principal, as well as gains and losses related to investments associated with certain employee deferred compensation plans.InvestmentsInvestments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions.Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions.Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. Return on Tangible Common Equity GoalWe have an ROTCE goal of over 20%. Our ROTCE goal is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors. See “Risk Factors” herein for further information on market and economic conditions and their potential effects on our future operating results.For further information on non-GAAP measures (ROTCE excluding integration-related expenses), see “Selected Non-GAAP Financial Information” herein.Business SegmentsSubstantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 23 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.The global economic and geopolitical environment in 2022 was characterized by elevated inflation, rising interest rates and volatility in global financial markets and these factors have continued into 2023. This environment has impacted our businesses, as discussed further herein.Net RevenuesInvestment Banking Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital.Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings.Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.TradingTrading revenues include the realized gains and losses from transactions in financial instruments, unrealized gains and losses from ongoing changes in the fair value of our positions, and gains and losses from financial instruments used to economically hedge compensation expense related to certain employee deferred compensation plans.Within the Institutional Securities business segment, Trading revenues arise from transactions in cash instruments and" }, { "status": "MODIFIED", "current_title": "Net Interest", "prior_title": "Net Interest", "similarity_score": 0.706, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Net interest revenues of $8,118 million in 2023 increased 9% compared with the prior year, primarily due to the net effect of higher interest rates, partially offset by changes in deposit mix.\"" ], "current_body": "Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Other Other revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments. Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.", "prior_body": "Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income.OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities lending products, activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making activities as securities held by the Firm generally earn interest, as do securities borrowed and securities purchased under agreements to resell, while securities loaned and securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. Upon acquisition, E*TRADE’s Investment securities were recorded at fair value, and the resulting premium is being amortized over the life of the portfolio against interest income. Other Other revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments. Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues." }, { "status": "MODIFIED", "current_title": "Liquidity Resources by Type of Investment", "prior_title": "Liquidity Resources by Type of Investment", "similarity_score": 0.705, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Cash deposits with central banks$64,205 $66,330 Unencumbered HQLA securities1:U.S.\"", "Reworded sentence: \"2.Primarily composed of unencumbered French, Japanese, U.K., German and Spanish government obligations.\"" ], "current_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Cash deposits with central banks$64,205 $66,330 Unencumbered HQLA securities1:U.S. government obligations137,635 122,110 U.S. agency and agency mortgage-backed securities83,733 86,628 Non-U.S. sovereign obligations220,117 23,416 Other investment grade securities678 693 Total HQLA1$306,368 $299,177 Cash deposits with banks (non-HQLA)8,136 8,190 Total Liquidity Resources$314,504 $307,367 Unencumbered HQLA securities1: Non-U.S. sovereign obligations2 Total HQLA1 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries. 2.Primarily composed of unencumbered French, Japanese, U.K., German and Spanish government obligations.", "prior_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Cash deposits with central banks$58,818 $61,447 Unencumbered HQLA securities1:U.S. government obligations136,020 132,788 U.S. agency and agency mortgage-backed securities87,591 89,279 Non-U.S. sovereign obligations220,583 15,812 Other investment grade securities694 607 Total HQLA1$303,706 $299,933 Cash deposits with banks (non-HQLA)8,544 8,068 Total Liquidity Resources$312,250 $308,001 Unencumbered HQLA securities1: Non-U.S. sovereign obligations2 Total HQLA1 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries. 2.Primarily composed of unencumbered French, Japanese, U.K., German and Dutch government obligations." }, { "status": "MODIFIED", "current_title": "Collateralized Financing Transactions", "prior_title": "Collateralized Financing Transactions", "similarity_score": 0.699, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Securities received as collateral1 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet.\"", "Reworded sentence: \"Our risk exposure on these transactions is mitigated by 51December 2023 Form 10-K 51December 2023 Form 10-K 51December 2023 Form 10-K 51 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents collateral maintenance policies and the elements of our Liquidity Risk Management Framework.\"", "Reworded sentence: \"Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria.\"" ], "current_body": "$ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Securities received as collateral1 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet. See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 8 to the financial statements for additional information on collateralized financing transactions. In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by 51December 2023 Form 10-K 51December 2023 Form 10-K 51December 2023 Form 10-K 51 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents collateral maintenance policies and the elements of our Liquidity Risk Management Framework. Unsecured FinancingWe view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 6 and 13 to the financial statements).Deposits$ in millionsAtDecember 31,2023 AtDecember 31,2022 Savings and demand deposits:Brokerage sweep deposits1$148,274 $202,592 Savings and other139,978 117,356 Total Savings and demand deposits288,252 319,948 Time deposits63,552 36,698 Total2$351,804 $356,646 1.Amounts represent balances swept from client brokerage accounts.2.As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion of off-balance sheet amounts were excluded from deposits at unaffiliated financial institutions.Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics relative to other sources of funding. Each category of deposits presented above has a different cost profile and clients may respond differently to changes in interest rates and other macroeconomic conditions. The decrease in total deposits in 2023 was primarily driven by a continued reduction in Brokerage sweep deposits, largely due to net outflows to alternative cash equivalent and other products, partially offset by an increase in Time deposits and Savings.Borrowings by Remaining Maturity at December 31, 20231$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $3,188 $3,188 Original maturities greater than one year2024$8,915 $11,236 $20,151 202522,030 13,493 35,523 202624,516 10,907 35,423 202719,282 6,056 25,338 202811,432 9,807 21,239 Thereafter90,635 32,235 122,870 Total greater than one year$176,810 $83,734 $260,544 Total$176,810 $86,922 $263,732 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date.Borrowings of $264 billion at December 31, 2023 increased from $238 billion at December 31, 2022, primarily due to issuances net of maturities and redemptions and mark-to-market adjustments on equity-linked borrowings driven by market factors.We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.For further information on Borrowings, see Note 13 to the financial statements.Credit RatingsWe rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.” collateral maintenance policies and the elements of our Liquidity Risk Management Framework. Unsecured FinancingWe view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 6 and 13 to the financial statements).Deposits$ in millionsAtDecember 31,2023 AtDecember 31,2022 Savings and demand deposits:Brokerage sweep deposits1$148,274 $202,592 Savings and other139,978 117,356 Total Savings and demand deposits288,252 319,948 Time deposits63,552 36,698 Total2$351,804 $356,646 1.Amounts represent balances swept from client brokerage accounts.2.As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion of off-balance sheet amounts were excluded from deposits at unaffiliated financial institutions.Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics relative to other sources of funding. Each category of deposits presented above has a different cost profile and clients may respond differently to changes in interest rates and other macroeconomic conditions. The decrease in total deposits in 2023 was primarily driven by a continued reduction in Brokerage sweep deposits, largely due to net outflows to alternative cash equivalent and other products, partially offset by an increase in Time deposits and Savings. collateral maintenance policies and the elements of our Liquidity Risk Management Framework.", "prior_body": "$ in millionsAtDecember 31,2022 AtDecember 31,2021 Securities purchased under agreements to resell and Securities borrowed$247,281 $249,712 Securities sold under agreements to repurchase and Securities loaned$78,213 $74,487 Securities received as collateral1$9,954 $10,504 Securities received as collateral1 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022December 31, 2021Securities purchased under agreements to resell and Securities borrowed$261,627 $236,327 Securities sold under agreements to repurchase and Securities loaned$77,268 $69,565 1.Included within Trading assets in the balance sheet. See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 9 to the financial statements for additional information on collateralized financing transactions. In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework. Unsecured FinancingWe view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 7 and 14 to the financial statements).Deposits$ in millionsAtDecember 31,2022 AtDecember 31,2021 Savings and demand deposits:Brokerage sweep deposits1$202,592 $298,352 Savings and other117,356 34,395 Total Savings and demand deposits319,948 332,747 Time deposits36,698 14,827 Total2$356,646 $347,574 1.Amounts represent balances swept from client brokerage accounts.2.Excludes approximately $6 billion and $9 billion of off-balance sheet deposits at unaffiliated financial institutions as of December 31, 2022 and December 31, 2021, respectively. This client cash held by third parties is not reflected in our balance sheet and is not immediately available for liquidity purposes.Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics. The increase in total deposits in 2022 was primarily driven by higher Savings and other and Time deposits, partially offset by a reduction in Brokerage sweep deposits.Borrowings by Remaining Maturity at December 31, 20221$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $4,191 $4,191 Original maturities greater than one year2023$11,007 $7,903 $18,910 202419,618 10,224 29,842 202521,462 8,773 30,235 202623,622 5,376 28,998 202717,072 6,489 23,561 Thereafter76,855 25,466 102,321 Total$169,636 $64,231 $233,867 Total Borrowings$169,636 $68,422 $238,058 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework." }, { "status": "MODIFIED", "current_title": "Performance-based Income and Other", "prior_title": "Performance-based Income and Other", "similarity_score": 0.695, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Performance-based income and other revenues increased to $139 million in 2023, from $43 million in the prior year, primarily due to mark-to-market gains in 2023 compared with losses in the prior year on DCP investments and investments in public funds, partially offset by lower accrued carried interest in certain private funds.\"" ], "current_body": "Performance-based income and other revenues increased to $139 million in 2023, from $43 million in the prior year, primarily due to mark-to-market gains in 2023 compared with losses in the prior year on DCP investments and investments in public funds, partially offset by lower accrued carried interest in certain private funds.", "prior_body": "Performance-based income and other revenues were $43 million in 2022, representing a 93% decrease from the prior year, primarily due to lower accrued carried interest in certain private equity and real estate funds, losses on investments associated with certain employee deferred cash-based compensation plans, and mark-to-market losses on public investments." }, { "status": "MODIFIED", "current_title": "Pre-tax margin by segment4", "prior_title": "Pre-tax margin by segment4", "similarity_score": 0.694, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in millions, except per share data, worldwide employees and client assetsAtDecember 31,2023AtDecember 31,2022Average liquidity resources for three months ended5$314,504 $312,250 Loans6$226,828 $222,182 Total assets$1,193,693 $1,180,231 Deposits$351,804 $356,646 Borrowings$263,732 $238,058 Common shareholders’ equity$90,288 $91,391 Tangible common shareholders’ equity3$66,527 $67,123 Common shares outstanding1,627 1,675 Book value per common share7$55.50 $54.55 Tangible book value per common share3,7$40.89 $40.06 Worldwide employees (in thousands)80 82 Client assets8 (in billions)$6,588 $5,492 Capital ratios9Common Equity Tier 1 capital—Standardized15.2 %15.3 %Tier 1 capital—Standardized17.1 %17.2 %Common Equity Tier 1 capital—Advanced15.5 %15.6 %Tier 1 capital—Advanced17.4 %17.6 %Tier 1 leverage6.7 %6.7 %SLR5.5 %5.5 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.\"" ], "current_body": "$ in millions, except per share data, worldwide employees and client assetsAtDecember 31,2023AtDecember 31,2022Average liquidity resources for three months ended5$314,504 $312,250 Loans6$226,828 $222,182 Total assets$1,193,693 $1,180,231 Deposits$351,804 $356,646 Borrowings$263,732 $238,058 Common shareholders’ equity$90,288 $91,391 Tangible common shareholders’ equity3$66,527 $67,123 Common shares outstanding1,627 1,675 Book value per common share7$55.50 $54.55 Tangible book value per common share3,7$40.89 $40.06 Worldwide employees (in thousands)80 82 Client assets8 (in billions)$6,588 $5,492 Capital ratios9Common Equity Tier 1 capital—Standardized15.2 %15.3 %Tier 1 capital—Standardized17.1 %17.2 %Common Equity Tier 1 capital—Advanced15.5 %15.6 %Tier 1 capital—Advanced17.4 %17.6 %Tier 1 leverage6.7 %6.7 %SLR5.5 %5.5 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.3.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM.9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.Economic and Market ConditionsThe market environment in 2023 remained mixed, characterized by inflationary pressures and uncertainty regarding the future path of interest rates, which remained persistently high. Towards the end of the year, the market environment improved from prior quarters with the expectation of lower interest rates going into 2024. However, there is continued uncertainty regarding the timing and pace of these rate reductions along with concerns regarding heightened geopolitical risks that could impact the capital markets in 2024. The market environment impacted our businesses in 2023, as discussed further in “Business Segments” herein, and, to the extent that it continues to remain uncertain, could adversely impact client confidence and related activity. For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to “Risk Factors” and “Forward-Looking Statements.” $ in millions, except per share data, worldwide employees and client assetsAtDecember 31,2023AtDecember 31,2022Average liquidity resources for three months ended5$314,504 $312,250 Loans6$226,828 $222,182 Total assets$1,193,693 $1,180,231 Deposits$351,804 $356,646 Borrowings$263,732 $238,058 Common shareholders’ equity$90,288 $91,391 Tangible common shareholders’ equity3$66,527 $67,123 Common shares outstanding1,627 1,675 Book value per common share7$55.50 $54.55 Tangible book value per common share3,7$40.89 $40.06 Worldwide employees (in thousands)80 82 Client assets8 (in billions)$6,588 $5,492 $ in millions, except per share data, worldwide employees and client assets Average liquidity resources for three months ended5 Loans6 Tangible common shareholders’ equity3 Book value per common share7 Tangible book value per common share3,7 Client assets8 (in billions) Capital ratios9Common Equity Tier 1 capital—Standardized15.2 %15.3 %Tier 1 capital—Standardized17.1 %17.2 %Common Equity Tier 1 capital—Advanced15.5 %15.6 %Tier 1 capital—Advanced17.4 %17.6 %Tier 1 leverage6.7 %6.7 %SLR5.5 %5.5 %", "prior_body": "Wealth Management, adjusted2 Investment Management, adjusted2 in millions, except per share data, worldwide employees and client assetsAtDecember 31,2022AtDecember 31,2021Average liquidity resources for three months ended5$312,250 $345,049 Loans6$222,182 $200,761 Total assets$1,180,231 $1,188,140 Deposits$356,646 $347,574 Borrowings$238,058 $233,127 Common shareholders’ equity$91,391 $97,691 Tangible common shareholders’ equity3$67,123 $72,499 Common shares outstanding1,675 1,772 Book value per common share7$54.55 $55.12 Tangible book value per common share3,7$40.06 $40.91 Worldwide employees (in thousands)82 75 Client assets8 (in billions)$5,492 $6,554 Average liquidity resources for three months ended5 Loans6 Tangible common shareholders’ equity3 Book value per common share7 Tangible book value per common share3,7 Client assets8 (in billions) Capital ratios9Common Equity Tier 1 capital—Standardized15.3 %16.0 %Tier 1 capital—Standardized17.2 %17.7 %Common Equity Tier 1 capital—Advanced15.6 %17.4 %Tier 1 capital—Advanced17.6 %19.1 %Tier 1 leverage6.7 %7.1 %SLR5.5 %5.6 %" }, { "status": "MODIFIED", "current_title": "Income Taxes", "prior_title": "Income Taxes", "similarity_score": 0.69, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The Income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment.\"", "Reworded sentence: \"December 2023 Form 10-K36 December 2023 Form 10-K36 December 2023 Form 10-K36 36 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Institutional SecuritiesIncome Statement Information % Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%Investment BankingInvestment Banking Volumes$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Source: Refinitiv data as of January 2, 2024.\"", "Reworded sentence: \"Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates.See “Investment Banking Volumes” herein.Equity, Fixed Income and Other Net RevenuesEquity and Fixed Income Net Revenues 2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 1.Includes Commissions and fees and Asset management revenues.2.Includes funding costs, which are allocated to the businesses based on funding usage.\"", "Reworded sentence: \"Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.\"" ], "current_body": "The Income tax provision for our business segments is generally determined based on the revenues, expenses and activities directly attributable to each business segment. Certain items have been allocated to each business segment, generally in proportion to its respective net revenues or other relevant measures. December 2023 Form 10-K36 December 2023 Form 10-K36 December 2023 Form 10-K36 36 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Institutional SecuritiesIncome Statement Information % Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%Investment BankingInvestment Banking Volumes$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.2.Based on full credit for single book managers and equal credit for joint book managers.3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates.See “Investment Banking Volumes” herein.Equity, Fixed Income and Other Net RevenuesEquity and Fixed Income Net Revenues 2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 1.Includes Commissions and fees and Asset management revenues.2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues.EquityNet revenues of $9,986 million in 2023 decreased 7% compared with the prior year, reflecting decreases in Financing and Execution services.•Financing revenues decreased primarily due to higher funding and liquidity costs compared with the prior year.•Execution services revenues decreased primarily due to lower gains on inventory held to facilitate client activity in derivatives and cash equities and lower client activity in cash equities, partially offset by mark-to-market gains on business-related investments compared with losses in the prior year.Fixed IncomeNet revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products.•Global macro products revenues decreased primarily due to a decline in foreign exchange products.•Credit products revenues decreased primarily due to lower client activity across products. Institutional SecuritiesIncome Statement Information % Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%Investment BankingInvestment Banking Volumes$ in billions202320222021Completed mergers and acquisitions1$655 $881 $1,107 Equity and equity-related offerings2, 331 23 117 Fixed income offerings2, 4235 229 371 Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.2.Based on full credit for single book managers and equal credit for joint book managers.3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.Investment Banking RevenuesNet revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.", "prior_body": "The Firm's effective tax rate of 20.7% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $24,393 million in 2022 decreased 18% from the prior year, primarily reflecting lower results from Investment banking, particularly equity underwriting, and losses in Other net revenues primarily from higher mark-to-market losses on corporate loans held for sale inclusive of hedges, partially offset by higher Fixed income results, particularly in global macro products.•Wealth Management net revenues of $24,417 million in 2022 increased 1% from the prior year, as higher Net interest revenues were offset by lower Transactional revenues, primarily driven by losses on investments associated with certain employee deferred cash-based compensation plans." }, { "status": "MODIFIED", "current_title": "Our borrowing costs and access to the debt capital markets depend on our credit ratings.", "prior_title": "Our borrowing costs and access to the debt capital markets depend on our credit ratings.", "similarity_score": 0.683, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The rating agencies continue to monitor certain Firm-specific and industrywide factors that are important to the determination of our credit ratings.\"", "Reworded sentence: \"Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, 17December 2023 Form 10-K 17December 2023 Form 10-K 17December 2023 Form 10-K 17 Table of Contents Table of Contents Table of Contents such as OTC and other derivative transactions, including credit derivatives and interest rate swaps.\"", "Reworded sentence: \"Termination of our trading agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities.\"" ], "current_body": "The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industrywide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions. Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, 17December 2023 Form 10-K 17December 2023 Form 10-K 17December 2023 Form 10-K 17 Table of Contents Table of Contents Table of Contents such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade.Termination of our trading agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”We are a holding company and depend on payments from our subsidiaries.The Parent Company has no business operations and depends on dividends, distributions, loans and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities.These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends or other capital actions by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein.Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies.In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets, interest rates and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.Legal, Regulatory and Compliance RiskLegal, regulatory and compliance risk includes the risk of legal or regulatory sanctions; material financial loss, including fines, penalties, judgments, damages and/or settlements; limitations on our business; or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing and anti-corruption rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal, Regulatory and Compliance Risk.”The financial services industry is subject to extensive regulation, and changes in regulation will impact our business.Like other major financial services firms, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business, including an increasing number of complex sanctions and disclosure regimes. These laws and regulations, which continue to increase in volume and complexity, significantly affect the way and costs of doing business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments.The Firm and its employees are subject to wide-ranging regulation and supervision, which, among other things, subject us to intensive scrutiny of our businesses and any plans for expansion of those businesses through acquisitions or otherwise, limitations on activities, a systemic risk regime that imposes heightened capital and liquidity and funding requirements and other enhanced prudential standards, such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade.Termination of our trading agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”We are a holding company and depend on payments from our subsidiaries.The Parent Company has no business operations and depends on dividends, distributions, loans and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Regulatory restrictions, tax restrictions or elections and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws, regulations and self-regulatory organization rules that, in certain circumstances, limit, as well as permit regulatory bodies to block or reduce, the flow of funds to the Parent Company, or that prohibit such transfers or dividends altogether, including steps to “ring fence” entities by regulators outside the U.S. to protect clients and creditors of such entities in the event of financial difficulties involving such entities.These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations. Furthermore, as a BHC, we may become subject to a prohibition or to limitations on our ability to pay dividends. The Federal Reserve, the OCC and the FDIC have the authority, and under certain circumstances the duty, to prohibit or to limit the payment of dividends or other capital actions by the banking organizations they supervise, including us and our U.S. Bank Subsidiaries. See “We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements” under “Legal, Regulatory and Compliance Risk” herein. such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade. Termination of our trading agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”", "prior_body": "The cost and availability of unsecured financing generally are impacted by (among other things) our long-term and short-term credit ratings. The rating agencies continue to monitor certain Firm-specific and industry-wide factors that are important to the determination of our credit ratings. These include governance, capital adequacy, the level and quality of earnings, liquidity and funding, risk appetite and management, asset quality, strategic direction, business mix, regulatory or legislative changes, macroeconomic environment and perceived levels of support, and it is possible that the rating agencies could downgrade our ratings and those of similar institutions. Our credit ratings also can have an adverse impact on certain trading revenues, particularly in those businesses where longer term counterparty performance is a key consideration, such as OTC and other derivative transactions, including credit derivatives and interest rate swaps. In connection with certain OTC trading agreements and certain other agreements associated with our Institutional Securities business segment, we may be required to provide additional collateral to, or immediately settle any outstanding liability balance with, certain counterparties in the event of a credit rating downgrade. Termination of our trading and other agreements could cause us to sustain losses and impair our liquidity by requiring us to find other sources of financing or to make significant payments in the form of cash or securities. The additional collateral or termination payments that may occur in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Ratings—Incremental Collateral or Terminating Payments.”" }, { "status": "MODIFIED", "current_title": "Support and Control Groups", "prior_title": "Support and Control Groups", "similarity_score": 0.678, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution.\"" ], "current_body": "Our support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division (“HCMGS”), Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance and regulatory risks; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.Internal Audit DepartmentThe Internal Audit Department (“IAD”) independently identifies and assesses risks facing the Firm and provides independent, objective and timely assurance to stakeholders about the effectiveness of risk management, governance and controls over key risks within the Firm’s businesses and functions. IAD develops and executes a comprehensive risk-based assurance plan to fulfill its role and purpose, which includes assessing compliance with policies, procedures and laws and regulations. IAD may also conduct other activities, such as retrospective reviews, pre-implementation reviews and investigations as requested by the BAC, senior management or the Firm’s regulators. IAD executes its activities in accordance with the mandatory elements of The Institute of Internal Auditors’ International Professional Practices Framework as well as the Firm’s Code of Ethics and Business Conduct, regulatory requirements, and IAD’s policies, procedures, standards and guidance. The Chief Audit Officer, who reports functionally to the BAC and administratively to the Firm’s Chief Executive Officer, communicates the results of IAD activities to the BAC on a quarterly basis and periodically to the BRC and BOTC.Culture, Values and Conduct of EmployeesEmployees of the Firm are accountable for conducting themselves in accordance with our core values: Put Clients First, Do the Right Thing, Lead with Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back. We are committed to reinforcing and confirming adherence to our core values through our governance framework, tone from the top, management oversight, risk management and controls, and three lines of defense structure (business, Independent Risk Management functions such as Financial Risk Management and Non-Financial Risk Management, and Internal Audit).The Board is responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct, as set forth in the Board’s Corporate Governance Policies. Senior management committees oversee the Firmwide culture, values and conduct program and report regularly to the Board. A fundamental building block of these programs is the Firm’s Code of Conduct, which establishes standards for employee conduct that further reinforce the Firm’s commitment to integrity and ethical conduct. Every new hire and every management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance and regulatory risks; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.", "prior_body": "Our support and control groups include, but are not limited to, Legal, the Finance Division, Technology Division, Operations Division, the Human Resources Department, Corporate Services, and Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment’s market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance, conduct and regulatory risk; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review." }, { "status": "MODIFIED", "current_title": "Regulatory Capital Ratios", "prior_title": "Regulatory Capital Ratios", "similarity_score": 0.675, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in millionsRequiredRatio1At December 31, 2023RequiredRatio1At December 31, 2022Risk-based capital— StandardizedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital78,183 77,191 Total capital88,874 86,575 Total RWA456,053 447,849 Common Equity Tier 1 capital ratio12.9 %15.2 %13.3 %15.3 %Tier 1 capital ratio14.4 %17.1 %14.8 %17.2 %Total capital ratio16.4 %19.5 %16.8 %19.3 % RequiredRatio1 RequiredRatio1 $ in millionsRequiredRatio1At December 31, 2023At December 31, 2022Risk-based capital—AdvancedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital 78,183 77,191 Total capital 88,190 86,159 Total RWA 448,154 438,806 Common Equity Tier 1 capital ratio10.0 %15.5 %15.6 %Tier 1 capital ratio11.5 %17.4 %17.6 %Total capital ratio13.5 %19.7 %19.6 %$ in millionsRequired Ratio1At December 31, 2023At December 31, 2022Leverage-based capitalAdjusted average assets2$1,159,626 $1,150,772 Tier 1 leverage ratio4.0 %6.7 %6.7 %Supplementary leverage exposure3$1,429,552 $1,399,403 SLR5.0 %5.5 %5.5 % RequiredRatio1 Required Ratio1 Adjusted average assets2 Supplementary leverage exposure3 SLR 1.Required ratios are inclusive of any buffers applicable as of the date presented.\"", "Reworded sentence: \"Regulatory Capital$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.\"" ], "current_body": "$ in millionsRequiredRatio1At December 31, 2023RequiredRatio1At December 31, 2022Risk-based capital— StandardizedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital78,183 77,191 Total capital88,874 86,575 Total RWA456,053 447,849 Common Equity Tier 1 capital ratio12.9 %15.2 %13.3 %15.3 %Tier 1 capital ratio14.4 %17.1 %14.8 %17.2 %Total capital ratio16.4 %19.5 %16.8 %19.3 % RequiredRatio1 RequiredRatio1 $ in millionsRequiredRatio1At December 31, 2023At December 31, 2022Risk-based capital—AdvancedCommon Equity Tier 1 capital$69,448 $68,670 Tier 1 capital 78,183 77,191 Total capital 88,190 86,159 Total RWA 448,154 438,806 Common Equity Tier 1 capital ratio10.0 %15.5 %15.6 %Tier 1 capital ratio11.5 %17.4 %17.6 %Total capital ratio13.5 %19.7 %19.6 %$ in millionsRequired Ratio1At December 31, 2023At December 31, 2022Leverage-based capitalAdjusted average assets2$1,159,626 $1,150,772 Tier 1 leverage ratio4.0 %6.7 %6.7 %Supplementary leverage exposure3$1,429,552 $1,399,403 SLR5.0 %5.5 %5.5 % RequiredRatio1 Required Ratio1 Adjusted average assets2 Supplementary leverage exposure3 SLR 1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. Regulatory Capital$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.", "prior_body": "$ in millionsRequiredRatio1At December 31, 2022RequiredRatio1At December 31, 2021Risk-based capital— StandardizedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital77,191 83,348 Total capital86,575 93,166 Total RWA447,849 471,921 Common Equity Tier 1 capital ratio13.3 %15.3 %13.2 %16.0 %Tier 1 capital ratio14.8 %17.2 %14.7 %17.7 %Total capital ratio16.8 %19.3 %16.7 %19.7 % RequiredRatio1 RequiredRatio1 $ in millionsRequiredRatio1At December 31, 2022At December 31, 2021Risk-based capital—AdvancedCommon Equity Tier 1 capital$68,670 $75,742 Tier 1 capital 77,191 83,348 Total capital 86,159 92,927 Total RWA 438,806 435,749 Common Equity Tier 1 capital ratio10.0 %15.6 %17.4 %Tier 1 capital ratio11.5 %17.6 %19.1 %Total capital ratio13.5 %19.6 %21.3 %$ in millionsRequired Ratio1At December 31, 2022At December 31, 2021Leverage-based capitalAdjusted average assets2$1,150,772 $1,169,939 Tier 1 leverage ratio4.0 %6.7 %7.1 %Supplementary leverage exposure,3$1,399,403 $1,476,962 SLR5.0 %5.5 %5.6 % RequiredRatio1 Required Ratio1 Adjusted average assets2 Supplementary leverage exposure,3 SLR 1.Required ratios are inclusive of any buffers applicable as of the date presented. 2.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions. 3.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. 47December 2022 Form 10-K 47December 2022 Form 10-K 47December 2022 Form 10-K 47 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Regulatory Capital$ in millionsAtDecember 31,2022AtDecember 31,2021 ChangeCommon Equity Tier 1 capitalCommon stock and surplus$2,782 $11,361 $(8,579)Retained earnings95,047 89,679 5,368 AOCI(6,253)(3,102)(3,151)Regulatory adjustments and deductions:Net goodwill(16,393)(16,641)248 Net intangible assets(6,048)(6,704)656 Other adjustments and deductions1(465)1,149 (1,614)Total Common Equity Tier 1 capital$68,670 $75,742 $(7,072)Additional Tier 1 capitalPreferred stock$8,750 $7,750 $1,000 Noncontrolling interests552 562 (10)Additional Tier 1 capital$9,302 $8,312 $990 Deduction for investments in covered funds(781)(706)(75)Total Tier 1 capital$77,191 $83,348 $(6,157)Standardized Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible ACL1,613 1,155 458 Other adjustments and deductions(75)54 (129)Total Standardized Tier 2 capital$9,384 $9,818 $(434)Total Standardized capital$86,575 $93,166 $(6,591)Advanced Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible credit reserves1,197 916 281 Other adjustments and deductions(75)54 (129)Total Advanced Tier 2 capital$8,968 $9,579 $(611)Total Advanced capital$86,159 $92,927 $(6,768)1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.RWA Rollforward$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2021$416,502 $285,247 Change related to the following items:Derivatives(21,332)1,738 Securities financing transactions(8,217)24 Investment securities(2,853)(8,348)Commitments, guarantees and loans12,698 4,881 Equity investments(3,738)(3,909)Other credit risk4,215 6,005 Total change in credit risk RWA$(19,227)$391 Balance at December 31, 2022$397,275 $285,638 Market risk RWABalance at December 31, 2021$55,419 $55,419 Change related to the following items:Regulatory VaR3,700 3,700 Regulatory stressed VaR1,585 1,585 Incremental risk charge(4,641)(4,641)Comprehensive risk measure(281)(292)Specific risk(5,208)(5,208)Total change in market risk RWA$(4,845)$(4,856)Balance at December 31, 2022$50,574 $50,563 Operational risk RWABalance at December 31, 2021N/A$95,083 Change in operational risk RWAN/A7,522 Balance at December 31, 2022N/A$102,605 Total RWA$447,849 $438,806 Regulatory VaR—VaR for regulatory capital requirementsIn 2022, Credit risk RWA decreased under the Standardized Approach but was relatively unchanged under the Advanced Approach. Under the Standardized Approach, the decrease was primarily driven by lower equity, commodities, and credit Derivatives as well as lower Securities financing transactions from margin lending, partially offset by lending growth. Under the Advanced Approach, lending growth, higher foreign exchange Derivatives exposures and higher other assets exposures were offset by lower Investment securities and Equity Investments.Market risk RWA decreased in 2022 under both the Standardized and Advanced Approaches primarily driven by lower Incremental Risk Charge driven by exposure reduction in the Fixed Income business and lower Specific risk securitization and non-securitization standardized charges, partially offset by higher Regulatory VaR.The increase in Operational risk RWA in 2022 reflects higher legal expenses and execution-related losses.G-SIB Capital SurchargeWe and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and Regulatory Capital$ in millionsAtDecember 31,2022AtDecember 31,2021 ChangeCommon Equity Tier 1 capitalCommon stock and surplus$2,782 $11,361 $(8,579)Retained earnings95,047 89,679 5,368 AOCI(6,253)(3,102)(3,151)Regulatory adjustments and deductions:Net goodwill(16,393)(16,641)248 Net intangible assets(6,048)(6,704)656 Other adjustments and deductions1(465)1,149 (1,614)Total Common Equity Tier 1 capital$68,670 $75,742 $(7,072)Additional Tier 1 capitalPreferred stock$8,750 $7,750 $1,000 Noncontrolling interests552 562 (10)Additional Tier 1 capital$9,302 $8,312 $990 Deduction for investments in covered funds(781)(706)(75)Total Tier 1 capital$77,191 $83,348 $(6,157)Standardized Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible ACL1,613 1,155 458 Other adjustments and deductions(75)54 (129)Total Standardized Tier 2 capital$9,384 $9,818 $(434)Total Standardized capital$86,575 $93,166 $(6,591)Advanced Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible credit reserves1,197 916 281 Other adjustments and deductions(75)54 (129)Total Advanced Tier 2 capital$8,968 $9,579 $(611)Total Advanced capital$86,159 $92,927 $(6,768)1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets." }, { "status": "MODIFIED", "current_title": "Liquidity Resources", "prior_title": "Liquidity Resources", "similarity_score": 0.668, "confidence": "medium", "key_changes": [ "Reworded sentence: \"We maintain sufficient Liquidity Resources to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests.\"", "Added sentence: \"Liquidity Resources by Type of InvestmentAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Cash deposits with central banks$64,205 $66,330 Unencumbered HQLA securities1:U.S.\"", "Added sentence: \"government obligations137,635 122,110 U.S.\"", "Added sentence: \"agency and agency mortgage-backed securities83,733 86,628 Non-U.S.\"", "Added sentence: \"sovereign obligations220,117 23,416 Other investment grade securities678 693 Total HQLA1$306,368 $299,177 Cash deposits with banks (non-HQLA)8,136 8,190 Total Liquidity Resources$314,504 $307,367 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.2.Primarily composed of unencumbered French, Japanese, U.K., German and Spanish government obligations.Liquidity Resources by Bank and Non-Bank Legal EntitiesAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Bank legal entitiesU.S.$132,870 $132,663 Non-U.S.5,359 6,101 Total Bank legal entities138,229 138,764 Non-Bank legal entitiesU.S.:Parent Company58,494 53,681 Non-Parent Company56,459 58,839 Total U.S.114,953 112,520 Non-U.S.61,322 56,083 Total Non-Bank legal entities176,275 168,603 Total Liquidity Resources$314,504 $307,367 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt, and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S.\"" ], "current_body": "We maintain sufficient Liquidity Resources to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements. The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations. Liquidity Resources by Type of InvestmentAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Cash deposits with central banks$64,205 $66,330 Unencumbered HQLA securities1:U.S. government obligations137,635 122,110 U.S. agency and agency mortgage-backed securities83,733 86,628 Non-U.S. sovereign obligations220,117 23,416 Other investment grade securities678 693 Total HQLA1$306,368 $299,177 Cash deposits with banks (non-HQLA)8,136 8,190 Total Liquidity Resources$314,504 $307,367 1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.2.Primarily composed of unencumbered French, Japanese, U.K., German and Spanish government obligations.Liquidity Resources by Bank and Non-Bank Legal EntitiesAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Bank legal entitiesU.S.$132,870 $132,663 Non-U.S.5,359 6,101 Total Bank legal entities138,229 138,764 Non-Bank legal entitiesU.S.:Parent Company58,494 53,681 Non-Parent Company56,459 58,839 Total U.S.114,953 112,520 Non-U.S.61,322 56,083 Total Non-Bank legal entities176,275 168,603 Total Liquidity Resources$314,504 $307,367 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt, and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable", "prior_body": "We maintain sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements. The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations." }, { "status": "MODIFIED", "current_title": "Net Income Applicable to Morgan Stanley by Segment1", "prior_title": "Net Income Applicable to Morgan Stanley by Segment1", "similarity_score": 0.668, "confidence": "medium", "key_changes": [ "Reworded sentence: \"($ in millions) 1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations.\"" ], "current_body": "($ in millions) 1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses. •Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues. •Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues. December 2023 Form 10-K30 December 2023 Form 10-K30 December 2023 Form 10-K30 30 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Net Revenues by Region1($ in millions)1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements.•Americas net revenues in 2023 increased 4%, primarily driven by results within the Wealth Management business segment and Other net revenues within the Institutional Securities business segment, partially offset by lower results across businesses within the Institutional Securities business segment. •EMEA net revenues in 2023 decreased 11%, primarily driven by lower results across businesses within the Institutional Securities business segment. •Asia net revenues in 2023 decreased 5%, primarily driven by lower results across businesses within the Institutional Securities business segment. Selected Financial Information and Other Statistical Data$ in millions, except per share data202320222021Consolidated resultsNet revenues$54,143 $53,668 $59,755 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Earnings per diluted common share$5.18 $6.15 $8.03 Consolidated financial measuresExpense efficiency ratio177 %73 %67 %ROE29.4 %11.2 %15.0 %ROTCE2,312.8 %15.3 %19.8 %Pre-tax margin422 %26 %33 %Effective tax rate 21.9 %20.7 %23.1 %Pre-tax margin by segment4Institutional Securities19 %28 %40 %Wealth Management25 %27 %25 %Investment Management16 %15 %27 %$ in millions, except per share data, worldwide employees and client assetsAtDecember 31,2023AtDecember 31,2022Average liquidity resources for three months ended5$314,504 $312,250 Loans6$226,828 $222,182 Total assets$1,193,693 $1,180,231 Deposits$351,804 $356,646 Borrowings$263,732 $238,058 Common shareholders’ equity$90,288 $91,391 Tangible common shareholders’ equity3$66,527 $67,123 Common shares outstanding1,627 1,675 Book value per common share7$55.50 $54.55 Tangible book value per common share3,7$40.89 $40.06 Worldwide employees (in thousands)80 82 Client assets8 (in billions)$6,588 $5,492 Capital ratios9Common Equity Tier 1 capital—Standardized15.2 %15.3 %Tier 1 capital—Standardized17.1 %17.2 %Common Equity Tier 1 capital—Advanced15.5 %15.6 %Tier 1 capital—Advanced17.4 %17.6 %Tier 1 leverage6.7 %6.7 %SLR5.5 %5.5 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.3.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM.9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.Economic and Market ConditionsThe market environment in 2023 remained mixed, characterized by inflationary pressures and uncertainty regarding the future path of interest rates, which remained persistently high. Towards the end of the year, the market environment improved from prior quarters with the expectation of lower interest rates going into 2024. However, there is continued uncertainty regarding the timing and pace of these rate reductions along with concerns regarding heightened geopolitical risks that could impact the capital markets in 2024. The market environment impacted our businesses in 2023, as discussed further in “Business Segments” herein, and, to the extent that it continues to remain uncertain, could adversely impact client confidence and related activity. For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to “Risk Factors” and “Forward-Looking Statements.” Net Revenues by Region1($ in millions)1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements.•Americas net revenues in 2023 increased 4%, primarily driven by results within the Wealth Management business segment and Other net revenues within the Institutional Securities business segment, partially offset by lower results across businesses within the Institutional Securities business segment. •EMEA net revenues in 2023 decreased 11%, primarily driven by lower results across businesses within the Institutional Securities business segment. •Asia net revenues in 2023 decreased 5%, primarily driven by lower results across businesses within the Institutional Securities business segment. Selected Financial Information and Other Statistical Data$ in millions, except per share data202320222021Consolidated resultsNet revenues$54,143 $53,668 $59,755 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Earnings per diluted common share$5.18 $6.15 $8.03 Consolidated financial measuresExpense efficiency ratio177 %73 %67 %ROE29.4 %11.2 %15.0 %ROTCE2,312.8 %15.3 %19.8 %Pre-tax margin422 %26 %33 %Effective tax rate 21.9 %20.7 %23.1 %Pre-tax margin by segment4Institutional Securities19 %28 %40 %Wealth Management25 %27 %25 %Investment Management16 %15 %27 %", "prior_body": "($ in millions) 1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $24,393 million in 2022 decreased 18% from the prior year, primarily reflecting lower results from Investment banking, particularly equity underwriting, and losses in Other net revenues primarily from higher mark-to-market losses on corporate loans held for sale inclusive of hedges, partially offset by higher Fixed income results, particularly in global macro products. •Wealth Management net revenues of $24,417 million in 2022 increased 1% from the prior year, as higher Net interest revenues were offset by lower Transactional revenues, primarily driven by losses on investments associated with certain employee deferred cash-based compensation plans. 23December 2022 Form 10-K 23December 2022 Form 10-K 23December 2022 Form 10-K 23 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Investment Management net revenues of $5,375 million in 2022 decreased 14% from the prior year, reflecting lower Performance-based income and other revenues and lower Asset management and related fees. Net Revenues by Region1, 2($ in millions)1.The percentages on the bars in the charts represent the contribution of each region to the total.2.For a discussion of how the geographic breakdown of net revenues is determined, see Note 23 to the financial statements.Americas net revenues in the current year period decreased 10%, driven by results within the Institutional Securities business segment, with lower Investment banking and Other net revenues, partially offset by higher results from Fixed income. EMEA net revenues decreased 12%, primarily driven by Investment banking results within the Institutional Securities business segment. Asia net revenues decreased 10%, primarily driven by results within the Institutional Securities business segment, with lower results in Investment banking and Equity, partially offset by higher results from Fixed income. Selected Financial Information and Other Statistical Data$ in millions, except per share data202220212020Consolidated resultsNet revenues$53,668 $59,755 $48,757 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Earnings per diluted common share$6.15 $8.03 $6.46 Consolidated financial measuresExpense efficiency ratio173 %67 %69 %Adjusted expense efficiency ratio1,272 %66 %68 %ROE311.2 %15.0 %13.1 %Adjusted ROE2,311.6 %15.3 %13.3 %ROTCE2,315.3 %19.8 %15.2 %Adjusted ROTCE2,315.7 %20.2 %15.4 %Pre-tax margin426 %33 %30 %Effective tax rate 20.7 %23.1 %22.5 %Pre-tax margin by segment4Institutional Securities28 %40 %35 %Wealth Management27 %25 %23 %Wealth Management, adjusted228 %27 %24 %Investment Management15 %27 %23 %Investment Management, adjusted217 %29 %23 %in millions, except per share data, worldwide employees and client assetsAtDecember 31,2022AtDecember 31,2021Average liquidity resources for three months ended5$312,250 $345,049 Loans6$222,182 $200,761 Total assets$1,180,231 $1,188,140 Deposits$356,646 $347,574 Borrowings$238,058 $233,127 Common shareholders’ equity$91,391 $97,691 Tangible common shareholders’ equity3$67,123 $72,499 Common shares outstanding1,675 1,772 Book value per common share7$54.55 $55.12 Tangible book value per common share3,7$40.06 $40.91 Worldwide employees (in thousands)82 75 Client assets8 (in billions)$5,492 $6,554 Capital ratios9Common Equity Tier 1 capital—Standardized15.3 %16.0 %Tier 1 capital—Standardized17.2 %17.7 %Common Equity Tier 1 capital—Advanced15.6 %17.4 %Tier 1 capital—Advanced17.6 %19.1 %Tier 1 leverage6.7 %7.1 %SLR5.5 %5.6 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM. The prior period has been revised to conform to the current period presentation. See “Business Segments—Wealth Management” herein for additional information. 9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein. •Investment Management net revenues of $5,375 million in 2022 decreased 14% from the prior year, reflecting lower Performance-based income and other revenues and lower Asset management and related fees. Net Revenues by Region1, 2($ in millions)1.The percentages on the bars in the charts represent the contribution of each region to the total.2.For a discussion of how the geographic breakdown of net revenues is determined, see Note 23 to the financial statements.Americas net revenues in the current year period decreased 10%, driven by results within the Institutional Securities business segment, with lower Investment banking and Other net revenues, partially offset by higher results from Fixed income. EMEA net revenues decreased 12%, primarily driven by Investment banking results within the Institutional Securities business segment. Asia net revenues decreased 10%, primarily driven by results within the Institutional Securities business segment, with lower results in Investment banking and Equity, partially offset by higher results from Fixed income. •Investment Management net revenues of $5,375 million in 2022 decreased 14% from the prior year, reflecting lower Performance-based income and other revenues and lower Asset management and related fees." }, { "status": "MODIFIED", "current_title": "Status of Loans Held for Investment", "prior_title": "Forecasted U.S. Real GDP Growth Rates in Base Scenario", "similarity_score": 0.667, "confidence": "medium", "key_changes": [ "Reworded sentence: \"At December 31, 2023At December 31, 2022ISWMISWMAccrual98.9 %99.8 %99.3 %99.9 %Nonaccrual11.1 %0.2 %0.7 %0.1 % Nonaccrual1 1.Nonaccrual loans are loans where principal or interest is not expected when contractually due or are past due 90 days or more.\"" ], "current_body": "At December 31, 2023At December 31, 2022ISWMISWMAccrual98.9 %99.8 %99.3 %99.9 %Nonaccrual11.1 %0.2 %0.7 %0.1 % Nonaccrual1 1.Nonaccrual loans are loans where principal or interest is not expected when contractually due or are past due 90 days or more. Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2023Net charge-off ratio10.47 %— %1.50 %— %— %0.08 %Average loans$7,062 $37,702 $8,590 $57,177 $91,126 $201,657 2022Net charge-off ratio1(0.09)%0.01 %0.09 %— %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %— %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 Net charge-off ratio1 Net charge-off ratio1 Net charge-off ratio1 CRE—Commercial real estate SBL—Securities-based lending 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL. December 2023 Form 10-K70 December 2023 Form 10-K70 December 2023 Form 10-K70 70 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Institutional Securities Loans and Lending Commitments1 At December 31, 2023 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$3 $11 $216 $— $230 A1,054 950 182 — 2,186 BBB7,117 10,076 346 — 17,539 BB11,723 16,367 1,775 277 30,142 Other NIG9,586 12,961 2,924 156 25,627 Unrated2111 1,036 62 2,910 4,119 Total loans, net of ACL29,594 41,401 5,505 3,343 79,843 Lending commitmentsAAA— 50 — — 50 AA2,610 3,064 154 — 5,828 A7,704 21,256 593 — 29,553 BBB9,161 46,304 106 — 55,571 BB4,069 16,431 1,594 414 22,508 Other NIG1,916 13,842 1,077 3 16,838 Unrated26 7 — — 13 Total lendingcommitments25,466 100,954 3,524 417 130,361 Total exposure$55,060 $142,355 $9,029 $3,760 $210,204 At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 NIG–Non-investment grade1.Counterparty credit ratings are internally determined by the CRM.2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.Institutional Securities Loans and Lending Commitments by Industry$ in millionsAtDecember 31,2023AtDecember 31,2022Financials$57,804 $54,222 Real estate35,342 32,358 Industrials18,056 14,557 Communications services15,301 15,336 Healthcare14,274 12,353 Information technology12,430 13,790 Consumer discretionary12,190 11,592 Utilities11,522 10,542 Consumer staples9,305 7,823 Energy9,156 9,115 Materials6,503 6,102 Insurance6,486 5,925 Other1,835 1,831 Total exposure$210,204 $195,546 Institutional Securities Lending ActivitiesThe Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial and Residential real estate, and Securities-based lending and Other. As of December 31, 2023 and December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in “Institutional Securities Event-Driven Loans and Lending Commitments” herein.Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 15 to the financial statements for information about our securitization activities. Institutional Securities Loans and Lending Commitments1 At December 31, 2023 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$3 $11 $216 $— $230 A1,054 950 182 — 2,186 BBB7,117 10,076 346 — 17,539 BB11,723 16,367 1,775 277 30,142 Other NIG9,586 12,961 2,924 156 25,627 Unrated2111 1,036 62 2,910 4,119 Total loans, net of ACL29,594 41,401 5,505 3,343 79,843 Lending commitmentsAAA— 50 — — 50 AA2,610 3,064 154 — 5,828 A7,704 21,256 593 — 29,553 BBB9,161 46,304 106 — 55,571 BB4,069 16,431 1,594 414 22,508 Other NIG1,916 13,842 1,077 3 16,838 Unrated26 7 — — 13 Total lendingcommitments25,466 100,954 3,524 417 130,361 Total exposure$55,060 $142,355 $9,029 $3,760 $210,204 At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 NIG–Non-investment grade1.Counterparty credit ratings are internally determined by the CRM.2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.", "prior_body": "4Q 20234Q 2024Year-over-year growth rate0.4 %1.7 % See Notes 10 to the financial statements for further information. See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL. December 2022 Form 10-K62 December 2022 Form 10-K62 December 2022 Form 10-K62 62 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Status of Loans Held for InvestmentAt December 31, 2022At December 31, 2021ISWMISWMAccrual99.3 %99.9 %98.7 %99.8 %Nonaccrual10.7 %0.1 %1.3 %0.2 %1.These loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt.Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2022Net charge-off ratio1(0.09)%0.01 %0.09 %— %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %— %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 2020Net charge-off ratio10.41 %— %0.87 %— %(0.01)%0.07 %Average loans$8,633 $25,281 $7,326 $32,361 $56,018 $129,619 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL.Institutional Securities Loans and Lending Commitments1 At December 31, 2022 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 At December 31, 2021 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$— $35 $38 $— $73 A890 1,089 675 — 2,654 BBB5,335 8,944 563 — 14,842 BB10,734 18,349 814 18 29,915 Other NIG4,656 10,475 3,439 160 18,730 Unrated2171 665 511 3,753 5,100 Total loans, net of ACL21,786 39,557 6,040 3,931 71,314 Lending commitmentsAAA— 50 — — 50 AA3,283 2,690 — — 5,973 A5,255 17,646 407 303 23,611 BBB6,703 36,096 766 — 43,565 BB2,859 19,698 3,122 — 25,679 Other NIG992 13,420 6,180 55 20,647 Unrated2672 40 3 — 715 Total lendingcommitments19,764 89,640 10,478 358 120,240 Total exposure$41,550 $129,197 $16,518 $4,289 $191,554 NIG–Non-investment grade1.Counterparty credit ratings are internally determined by the CRM.2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.Institutional Securities Loans and Lending Commitments by Industry$ in millionsAtDecember 31,2022AtDecember 31,2021Financials$54,222 $52,066 Real estate32,358 31,560 Communications services15,336 12,645 Industrials14,557 17,446 Information technology13,790 13,471 Healthcare12,353 12,618 Consumer discretionary11,592 11,628 Utilities10,542 10,310 Energy9,115 8,544 Consumer staples7,823 7,855 Materials6,102 6,394 Insurance5,925 4,954 Other1,831 2,063 Total exposure$195,546 $191,554 Institutional Securities Lending ActivitiesThe Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate, and Securities-based lending and Other. As of December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge Status of Loans Held for InvestmentAt December 31, 2022At December 31, 2021ISWMISWMAccrual99.3 %99.9 %98.7 %99.8 %Nonaccrual10.7 %0.1 %1.3 %0.2 %1.These loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt.Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2022Net charge-off ratio1(0.09)%0.01 %0.09 %— %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %— %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 2020Net charge-off ratio10.41 %— %0.87 %— %(0.01)%0.07 %Average loans$8,633 $25,281 $7,326 $32,361 $56,018 $129,619 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL.Institutional Securities Loans and Lending Commitments1 At December 31, 2022 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$66 $— $139 $— $205 A1,331 787 185 — 2,303 BBB5,632 10,712 465 — 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA— 50 — — 50 AA2,515 2,935 11 — 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 — 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 — 15,575 Unrated2— 20 — 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546" }, { "status": "MODIFIED", "current_title": "U.S. Bank Subsidiaries’ Supplemental Financial Information1", "prior_title": "U.S. Bank Subsidiaries’ Supplemental Financial Information1", "similarity_score": 0.664, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in billionsAtDecember 31,2023AtDecember 31,2022 Investment securities:Available-for-sale at fair value$66.6 $66.9 Held-to-maturity51.4 56.4 Total Investment securities$118.0 $123.3 Wealth Management Loans2Residential real estate$60.3 $54.4 Securities-based lending and Other386.2 91.7 Total, net of ACL$146.5 $146.1 Institutional Securities Loans2Corporate$10.1 $6.9 Secured lending facilities40.8 37.1 Commercial and Residential real estate10.7 10.2 Securities-based lending and Other4.1 6.0 Total, net of ACL$65.7 $60.2 Total Assets$396.1 $391.0 Deposits4$346.1 $350.6\"" ], "current_body": "$ in billionsAtDecember 31,2023AtDecember 31,2022 Investment securities:Available-for-sale at fair value$66.6 $66.9 Held-to-maturity51.4 56.4 Total Investment securities$118.0 $123.3 Wealth Management Loans2Residential real estate$60.3 $54.4 Securities-based lending and Other386.2 91.7 Total, net of ACL$146.5 $146.1 Institutional Securities Loans2Corporate$10.1 $6.9 Secured lending facilities40.8 37.1 Commercial and Residential real estate10.7 10.2 Securities-based lending and Other4.1 6.0 Total, net of ACL$65.7 $60.2 Total Assets$396.1 $391.0 Deposits4$346.1 $350.6", "prior_body": "$ in billionsAtDecember 31,2022AtDecember 31,2021 Investment securities portfolio:Investment securities—AFS$66.9 $81.6 Investment securities—HTM56.4 61.7 Total investment securities$123.3 $143.3 Wealth Management Loans2Residential real estate$54.4 $44.2 Securities-based lending and Other391.7 85.0 Total, net of ACL$146.1 $129.2 Institutional Securities Loans2Corporate$6.9 $6.5 Secured lending facilities37.1 33.1 Commercial and Residential real estate10.2 10.4 Securities-based lending and Other6.0 6.3 Total, net of ACL$60.2 $56.3 Total Assets$391.0 $386.1 Deposits4$350.6 $346.2" }, { "status": "MODIFIED", "current_title": "Fee-Based Client Assets Rollforwards", "prior_title": "Fee-Based Client Assets Rollforwards", "similarity_score": 0.646, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in billionsAtDecember 31,2022 Inflows1Outflows2MarketImpact3AtDecember 31,2023 Separately managed4$501 $70 $(23)$41 $589 Unified managed408 96 (56)53 501 Advisor167 29 (32)24 188 Portfolio manager552 98 (73)68 645 Subtotal$1,628 $293 $(184)$186 $1,923 Cash management50 60 (50)— 60 Total fee-based client assets$1,678 $353 $(234)$186 $1,983 Inflows1 Outflows2 Market Impact3 Separately managed4 $ in billionsAtDecember 31,2021 Inflows1,5Outflows2MarketImpact3AtDecember 31,2022 Separately managed4$479 $141 $(25)$(94)$501 Unified managed467 76 (50)(85)408 Advisor211 29 (35)(38)167 Portfolio manager636 94 (67)(111)552 Subtotal$1,793 $340 $(177)$(328)$1,628 Cash management46 38 (34)— 50 Total fee-based client assets$1,839 $378 $(211)$(328)$1,678 Inflows1,5 Outflows2 Market Impact3 Separately managed4 $ in billionsAtDecember 31,2020 Inflows1,6Outflows2MarketImpact3AtDecember 31,2021 Separately managed4$359 $86 $(20)$54 $479 Unified managed379 100 (54)42 467 Advisor177 42 (30)22 211 Portfolio manager509 113 (58)72 636 Subtotal$1,424 $341 $(162)$190 $1,793 Cash management48 30 (32)— 46 Total fee-based client assets$1,472 $371 $(194)$190 $1,839 Inflows1,6 Outflows2 Market Impact3 Separately managed4 1.Inflows include new accounts, account transfers, deposits, dividends and interest.\"" ], "current_body": "$ in billionsAtDecember 31,2022 Inflows1Outflows2MarketImpact3AtDecember 31,2023 Separately managed4$501 $70 $(23)$41 $589 Unified managed408 96 (56)53 501 Advisor167 29 (32)24 188 Portfolio manager552 98 (73)68 645 Subtotal$1,628 $293 $(184)$186 $1,923 Cash management50 60 (50)— 60 Total fee-based client assets$1,678 $353 $(234)$186 $1,983 Inflows1 Outflows2 Market Impact3 Separately managed4 $ in billionsAtDecember 31,2021 Inflows1,5Outflows2MarketImpact3AtDecember 31,2022 Separately managed4$479 $141 $(25)$(94)$501 Unified managed467 76 (50)(85)408 Advisor211 29 (35)(38)167 Portfolio manager636 94 (67)(111)552 Subtotal$1,793 $340 $(177)$(328)$1,628 Cash management46 38 (34)— 50 Total fee-based client assets$1,839 $378 $(211)$(328)$1,678 Inflows1,5 Outflows2 Market Impact3 Separately managed4 $ in billionsAtDecember 31,2020 Inflows1,6Outflows2MarketImpact3AtDecember 31,2021 Separately managed4$359 $86 $(20)$54 $479 Unified managed379 100 (54)42 467 Advisor177 42 (30)22 211 Portfolio manager509 113 (58)72 636 Subtotal$1,424 $341 $(162)$190 $1,793 Cash management48 30 (32)— 46 Total fee-based client assets$1,472 $371 $(194)$190 $1,839 Inflows1,6 Outflows2 Market Impact3 Separately managed4 1.Inflows include new accounts, account transfers, deposits, dividends and interest. 2.Outflows include closed or terminated accounts, account transfers, withdrawals and client fees. 3.Market impact includes realized and unrealized gains and losses on portfolio investments. 4.Includes non-custody account values based on asset values reported on a quarter lag by third-party custodians. 5.Includes $75 billion of fee-based assets acquired in an asset acquisition in the first quarter of 2022, reflected in Separately managed. 6.Includes $43 billion of fee-based assets acquired in an asset acquisition in the third quarter of 2021, reflected in Separately managed.", "prior_body": "$ in billionsAtDecember 31,2021 Inflows1OutflowsMarketImpactAtDecember 31,2022 Separately managed2$479 $141 $(25)$(94)$501 Unified managed467 76 (50)(85)408 Advisor211 29 (35)(38)167 Portfolio manager636 94 (67)(111)552 Subtotal$1,793 $340 $(177)$(328)$1,628 Cash management46 38 (34)— 50 Total fee-based client assets$1,839 $378 $(211)$(328)$1,678 Inflows1 Separately managed2 $ in billionsAtDecember 31,2020 Inflows3OutflowsMarketImpactAtDecember 31,2021 Separately managed2$359 $86 $(20)$54 $479 Unified managed379 100 (54)42 467 Advisor177 42 (30)22 211 Portfolio manager509 113 (58)72 636 Subtotal$1,424 $341 $(162)$190 $1,793 Cash management48 30 (32)— 46 Total fee-based client assets$1,472 $371 $(194)$190 $1,839 Inflows3 Separately managed2 $ in billionsAtDecember 31,2019 InflowsOutflowsMarketImpactAtDecember 31,2020 Separately managed2$322 $48 $(25)$14 $359 Unified managed313 63 (43)46 379 Advisor155 33 (28)17 177 Portfolio manager435 86 (57)45 509 Subtotal$1,225 $230 $(153)$122 $1,424 Cash management42 28 (22)— 48 Total fee-based client assets$1,267 $258 $(175)$122 $1,472 Separately managed2 1.Includes $75 billion of fee-based assets acquired in an asset acquisition in the first quarter of 2022, reflected in Separately managed. 2.Includes non-custody account values reflecting prior quarter-end balances due to a lag in the reporting of asset values by third-party custodians. 3.Includes $43 billion of fee-based assets acquired in an asset acquisition in the third quarter of 2021, reflected in Separately managed." }, { "status": "MODIFIED", "current_title": "We may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances, and certain acquisitions may subject our business to new or increased risk.", "prior_title": "We may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances, and certain acquisitions may subject our business to new or increased risk.", "similarity_score": 0.646, "confidence": "medium", "key_changes": [ "Reworded sentence: \"In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with Mitsubishi UFJ Financial Group, Inc.\"", "Reworded sentence: \"In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because December 2023 Form 10-K24 December 2023 Form 10-K24 December 2023 Form 10-K24 24 Table of Contents Table of Contents Table of Contents we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated.\"", "Reworded sentence: \"These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered.For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated.\"", "Reworded sentence: \"For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” 25December 2023 Form 10-K 25December 2023 Form 10-K 25December 2023 Form 10-K 25 Table of Contents Table of Contents Table of Contents CybersecurityRisk management and strategyWe, our businesses, and the broader financial services industry face an increasingly complex and evolving threat environment.\"" ], "current_body": "In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with Mitsubishi UFJ Financial Group, Inc. (“MUFG”)), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because December 2023 Form 10-K24 December 2023 Form 10-K24 December 2023 Form 10-K24 24 Table of Contents Table of Contents Table of Contents we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected.Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered.For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected.Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered.For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively. There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected. Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered. For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” 25December 2023 Form 10-K 25December 2023 Form 10-K 25December 2023 Form 10-K 25 Table of Contents Table of Contents Table of Contents CybersecurityRisk management and strategyWe, our businesses, and the broader financial services industry face an increasingly complex and evolving threat environment. We have made and continue to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead our Cybersecurity and Information Security organizations and program under the oversight of our Board of Directors (“Board”) and the Operations and Technology Committee of the Board (“BOTC”). See “Risk Factors—Operational Risk” for information on risks to the Firm from cybersecurity threats.As part of our enterprise risk management (“ERM”) framework, we have implemented and maintain a program to assess, identify and manage risks arising from the cybersecurity threats confronting the Firm (“Cybersecurity Program”). Our Cybersecurity Program helps protect our clients, customers, employees, property, products, services and reputation by seeking to preserve the confidentiality, integrity and availability of information, enable the secure delivery of financial services, and protect the business and the safe operation of our technology systems. We continually adjust our Cybersecurity Program to address the evolving cybersecurity threat landscape and comply with extensive legal and regulatory expectations.Processes for assessing, identifying and managing material risks from cybersecurity threatsOur Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to our network, infrastructure, computing environment and the third parties that we rely on. We periodically assess the design of our cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework for Improving Critical Infrastructure Cybersecurity, as well as global cybersecurity regulations, and develop improvements to those controls in response to that assessment. Our Cybersecurity Program also includes cybersecurity and information security policies, procedures and technologies that are designed to address regulatory requirements and protect our clients’, employees’ and own data against unauthorized disclosure, modification and misuse. These policies, procedures and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning. Our threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs our cybersecurity risk assessments and strategy. This information is also provided to an internal forensics team, which develops and implements technologies designed to help detect these cybersecurity threats across our environment. Where a potential threat is identified in our environment, our incident response team evaluates the potential impact to the Firm and coordinates remediation where required. These groups, as well as the Operational Risk Department, review external cybersecurity incidents that may be relevant to the Firm, and the outcomes of these incidents further inform the design of our Cybersecurity Program. In addition, we maintain a robust global training program on cybersecurity risks and requirements and conduct regular phishing email simulations for our employees and consultants.Our processes are designed to help oversee, identify and mitigate cybersecurity risks associated with our use of third-party vendors. We maintain a third-party risk management program that includes evaluation of, and response to, cybersecurity risks at our third-party vendors. Prior to engaging third-party vendors to provide services to the Firm, we conduct assessments of the third-party vendors’ cybersecurity programs to identify the impact of their services on the cybersecurity risks to the Firm. Once on-boarded, third-party vendors’ cybersecurity programs are subject to risk-based oversight, which may include security questionnaires, submission of independent security audit reports or a Firm audit of the third-party vendor’s security program, and, with limited exceptions, third-party vendors are required to meet our cybersecurity standards. Where a third-party vendor cannot meet those standards, its services, and the residual risk to the Firm, are subject to review, challenge and escalation through our risk management processes and ERM committees, which may ultimately result in requesting increased security measures or ceasing engagement with such third-party vendor. Our Cybersecurity Program is regularly assessed by the Internal Audit Department (“IAD”) through various assurance activities, with the results reported to the Audit Committee of the Board (“BAC”) and the BOTC. Annually, certain elements of the Cybersecurity Program are subject to an audit by an independent consultant, as well as an assessment by a separate, independent third party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. Our Cybersecurity Program is also examined regularly by the Firm’s prudential and conduct regulators within the scope of their jurisdiction.GovernanceManagement’s role in assessing and managing material risks from cybersecurity threatsOur Cybersecurity Program is operated and maintained by management, including the Chief Information Officer of Cyber, Data, Risk and Resilience (“CIO”) and the Chief Information Security Officer (“CISO”). These senior officers CybersecurityRisk management and strategyWe, our businesses, and the broader financial services industry face an increasingly complex and evolving threat environment. We have made and continue to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead our Cybersecurity and Information Security organizations and program under the oversight of our Board of Directors (“Board”) and the Operations and Technology Committee of the Board (“BOTC”). See “Risk Factors—Operational Risk” for information on risks to the Firm from cybersecurity threats.As part of our enterprise risk management (“ERM”) framework, we have implemented and maintain a program to assess, identify and manage risks arising from the cybersecurity threats confronting the Firm (“Cybersecurity Program”). Our Cybersecurity Program helps protect our clients, customers, employees, property, products, services and reputation by seeking to preserve the confidentiality, integrity and availability of information, enable the secure delivery of financial services, and protect the business and the safe operation of our technology systems. We continually adjust our Cybersecurity Program to address the evolving cybersecurity threat landscape and comply with extensive legal and regulatory expectations.Processes for assessing, identifying and managing material risks from cybersecurity threatsOur Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to our network, infrastructure, computing environment and the third parties that we rely on. We periodically assess the design of our cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework for Improving Critical Infrastructure Cybersecurity, as well as global cybersecurity regulations, and develop improvements to those controls in response to that assessment. Our Cybersecurity Program also includes cybersecurity and information security policies, procedures and technologies that are designed to address regulatory requirements and protect our clients’, employees’ and own data against unauthorized disclosure, modification and misuse. These policies, procedures and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning. Our threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs our cybersecurity risk assessments and", "prior_body": "In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with MUFG), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively.For example, the integrations of E*TRADE and Eaton Vance involve a number of risks, including failure to realize anticipated cost savings and difficulty integrating the businesses. It is possible that the remaining integration processes could also result in unanticipated disruptions of ongoing businesses, the loss of key employees, the loss of clients, or overall integrations that take longer than originally anticipated.There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected.Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered.For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively. For example, the integrations of E*TRADE and Eaton Vance involve a number of risks, including failure to realize anticipated cost savings and difficulty integrating the businesses. It is possible that the remaining integration processes could also result in unanticipated disruptions of ongoing businesses, the loss of key employees, the loss of clients, or overall integrations that take longer than originally anticipated. There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected. Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered. For more information regarding the regulatory environment in which we operate, see also “Business—Supervision and Regulation.” December 2022 Form 10-K20 December 2022 Form 10-K20 December 2022 Form 10-K20 20 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "2023 Compared with 2022", "prior_title": "2022 Compared with 2021", "similarity_score": 0.639, "confidence": "medium", "key_changes": [ "Reworded sentence: \"•We reported net revenues of $54.1 billion in 2023 compared with $53.7 billion in 2022.\"" ], "current_body": "•We reported net revenues of $54.1 billion in 2023 compared with $53.7 billion in 2022. For 2023, net income applicable to Morgan Stanley was $9.1 billion, or $5.18 per diluted common share, compared with $11.0 billion, or $6.15 per diluted common share in 2022. 29December 2023 Form 10-K 29December 2023 Form 10-K 29December 2023 Form 10-K 29 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Non-Interest Expenses($ in millions)•Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation.2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023.•Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter. Provision for Credit LossesThe Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook.For further information on the Provision for credit losses, see “Credit Risk” herein.Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses.•Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues.•Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues. Non-Interest Expenses($ in millions)•Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation.2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023.•Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter. Provision for Credit LossesThe Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook.For further information on the Provision for credit losses, see “Credit Risk” herein.", "prior_body": "•We reported net revenues of $53.7 billion in 2022 compared with $59.8 billion in 2021. For 2022, net income applicable to Morgan Stanley was $11.0 billion, or $6.15 per diluted common share, compared with $15.0 billion, or $8.03 per diluted common share in 2021. December 2022 Form 10-K22 December 2022 Form 10-K22 December 2022 Form 10-K22 22 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Non-interest Expenses1($ in millions)1.The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total.•Compensation and benefits expenses of $23,053 million in 2022 decreased 6% from the prior year, primarily due to lower expenses related to certain deferred cash-based compensation plans linked to investment performance, lower discretionary incentive compensation on lower revenues, and lower stock-based compensation expense driven by the Firm’s share price, partially offset by higher salary expenses driven in part by the impact of higher headcount.2022 Compensation and benefits expenses included $133 million associated with a December employee action recorded in the fourth quarter of 2022.•Non-compensation expenses of $16,246 million in 2022 increased 5% from the prior year, primarily due to an increased spend on technology and higher legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022. Provision for Credit LossesThe Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $4 million in 2021 was primarily as a result of portfolio growth offset by the impact of changes in loan quality mix.Income TaxesThe Firm's effective tax rate of 20.7% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $24,393 million in 2022 decreased 18% from the prior year, primarily reflecting lower results from Investment banking, particularly equity underwriting, and losses in Other net revenues primarily from higher mark-to-market losses on corporate loans held for sale inclusive of hedges, partially offset by higher Fixed income results, particularly in global macro products.•Wealth Management net revenues of $24,417 million in 2022 increased 1% from the prior year, as higher Net interest revenues were offset by lower Transactional revenues, primarily driven by losses on investments associated with certain employee deferred cash-based compensation plans. Non-interest Expenses1($ in millions)1.The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total.•Compensation and benefits expenses of $23,053 million in 2022 decreased 6% from the prior year, primarily due to lower expenses related to certain deferred cash-based compensation plans linked to investment performance, lower discretionary incentive compensation on lower revenues, and lower stock-based compensation expense driven by the Firm’s share price, partially offset by higher salary expenses driven in part by the impact of higher headcount.2022 Compensation and benefits expenses included $133 million associated with a December employee action recorded in the fourth quarter of 2022.•Non-compensation expenses of $16,246 million in 2022 increased 5% from the prior year, primarily due to an increased spend on technology and higher legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022. Provision for Credit LossesThe Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $4 million in 2021 was primarily as a result of portfolio growth offset by the impact of changes in loan quality mix.Income TaxesThe Firm's effective tax rate of 20.7% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits." }, { "status": "MODIFIED", "current_title": "Provision for Credit Losses", "prior_title": "Provision for Credit Losses", "similarity_score": 0.635, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The Provision for credit losses on loans and lending commitments of $131 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio.\"" ], "current_body": "The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see “Credit Risk” herein. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses.•Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues.•Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues.", "prior_body": "The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $4 million in 2021 was primarily as a result of portfolio growth offset by the impact of changes in loan quality mix." }, { "status": "MODIFIED", "current_title": "Asset Management and Related Fees", "prior_title": "Asset Management and Related Fees", "similarity_score": 0.634, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Asset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows.\"" ], "current_body": "Asset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows. Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. The market environment and client preferences in recent quarters have impacted the mix of our average Long-Term AUM level across certain asset classes. To the extent these conditions continue, we would expect our Asset management revenue to continue to be negatively impacted. See “Assets Under Management or Supervision” herein.", "prior_body": "Asset management and related fees of $5,332 million in 2022 decreased 4% compared with the prior year, reflecting the impact of the decline in the equity markets, partially offset by incremental revenues as a result of the Eaton Vance acquisition and the impact of lower fee waivers in certain money market funds. Asset management revenues are influenced by the level and relative mix of AUM and related fee rates. The current market environment may impact AUM and net flows within asset classes and therefore our asset management revenues. See “Assets under Management or Supervision” herein." }, { "status": "MODIFIED", "current_title": "Required Liquidity Framework", "prior_title": "Required Liquidity Framework", "similarity_score": 0.632, "confidence": "medium", "key_changes": [ "Removed sentence: \"The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.Liquidity Stress TestsWe use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons.\"", "Removed sentence: \"These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration.\"", "Removed sentence: \"The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets;•Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment.\"", "Removed sentence: \"The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves.\"", "Removed sentence: \"In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.At December 31, 2022 and December 31, 2021, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.\"" ], "current_body": "Our Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.", "prior_body": "Our Required Liquidity Framework establishes the amount of liquidity we must hold in both normal and stressed environments to ensure that our financial condition and overall soundness are not adversely affected by an inability (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level.Liquidity Stress TestsWe use Liquidity Stress Tests to model external and intercompany liquidity flows across multiple scenarios and a range of time horizons. These scenarios contain various combinations of idiosyncratic and systemic stress events of different severity and duration. The methodology, implementation, production and analysis of our Liquidity Stress Tests are important components of the Required Liquidity Framework.The assumptions used in our various Liquidity Stress Test scenarios include, but are not limited to, the following:•No government support;•No access to equity and limited access to unsecured debt markets;•Repayment of all unsecured debt maturing within the stress horizon;•Higher haircuts for and significantly lower availability of secured funding;•Additional collateral that would be required by trading counterparties, certain exchanges and clearing organizations related to credit rating downgrades;•Additional collateral that would be required due to collateral substitutions, collateral disputes and uncalled collateral;•Discretionary unsecured debt buybacks;•Drawdowns on lending commitments provided to third parties; and•Client cash withdrawals and reduction in customer short positions that fund long positions.Liquidity Stress Tests are produced and results are reported at different levels, including major operating subsidiaries and major currencies, to capture specific cash requirements and cash availability across the Firm, including a limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will use their own liquidity first to fund their obligations before drawing liquidity from the Parent Company and that the Parent Company will support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions underpinning the Liquidity Stress Tests, we take into consideration settlement risk related to intraday settlement and clearing of securities and financing activities.At December 31, 2022 and December 31, 2021, we maintained sufficient Liquidity Resources to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests. (or perceived inability) to meet our financial obligations in a timely manner. The Required Liquidity Framework considers the most constraining liquidity requirement to satisfy all regulatory and internal limits at a consolidated and legal entity level." }, { "status": "MODIFIED", "current_title": "Capital ratios9", "prior_title": "Net Revenues by Region1, 2", "similarity_score": 0.621, "confidence": "medium", "key_changes": [ "Reworded sentence: \"1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.\"", "Removed sentence: \"The prior period has been revised to conform to the current period presentation.\"", "Removed sentence: \"See “Business Segments—Wealth Management” herein for additional information.\"" ], "current_body": "1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. 3.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. 4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues. 5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein. 6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet. 7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding. 8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM. 9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.", "prior_body": "($ in millions) 1.The percentages on the bars in the charts represent the contribution of each region to the total. 2.For a discussion of how the geographic breakdown of net revenues is determined, see Note 23 to the financial statements. Americas net revenues in the current year period decreased 10%, driven by results within the Institutional Securities business segment, with lower Investment banking and Other net revenues, partially offset by higher results from Fixed income. EMEA net revenues decreased 12%, primarily driven by Investment banking results within the Institutional Securities business segment. Asia net revenues decreased 10%, primarily driven by results within the Institutional Securities business segment, with lower results in Investment banking and Equity, partially offset by higher results from Fixed income. Selected Financial Information and Other Statistical Data$ in millions, except per share data202220212020Consolidated resultsNet revenues$53,668 $59,755 $48,757 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Earnings per diluted common share$6.15 $8.03 $6.46 Consolidated financial measuresExpense efficiency ratio173 %67 %69 %Adjusted expense efficiency ratio1,272 %66 %68 %ROE311.2 %15.0 %13.1 %Adjusted ROE2,311.6 %15.3 %13.3 %ROTCE2,315.3 %19.8 %15.2 %Adjusted ROTCE2,315.7 %20.2 %15.4 %Pre-tax margin426 %33 %30 %Effective tax rate 20.7 %23.1 %22.5 %Pre-tax margin by segment4Institutional Securities28 %40 %35 %Wealth Management27 %25 %23 %Wealth Management, adjusted228 %27 %24 %Investment Management15 %27 %23 %Investment Management, adjusted217 %29 %23 %in millions, except per share data, worldwide employees and client assetsAtDecember 31,2022AtDecember 31,2021Average liquidity resources for three months ended5$312,250 $345,049 Loans6$222,182 $200,761 Total assets$1,180,231 $1,188,140 Deposits$356,646 $347,574 Borrowings$238,058 $233,127 Common shareholders’ equity$91,391 $97,691 Tangible common shareholders’ equity3$67,123 $72,499 Common shares outstanding1,675 1,772 Book value per common share7$54.55 $55.12 Tangible book value per common share3,7$40.06 $40.91 Worldwide employees (in thousands)82 75 Client assets8 (in billions)$5,492 $6,554 Capital ratios9Common Equity Tier 1 capital—Standardized15.3 %16.0 %Tier 1 capital—Standardized17.2 %17.7 %Common Equity Tier 1 capital—Advanced15.6 %17.4 %Tier 1 capital—Advanced17.6 %19.1 %Tier 1 leverage6.7 %7.1 %SLR5.5 %5.6 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources— Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.7.Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM. The prior period has been revised to conform to the current period presentation. See “Business Segments—Wealth Management” herein for additional information. 9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein." }, { "status": "MODIFIED", "current_title": "Income Statement Information", "prior_title": "Income Statement Information", "similarity_score": 0.609, "confidence": "medium", "key_changes": [ "Reworded sentence: \"% Change$ in millions20232022202120232022RevenuesAsset management and related fees$5,231 $5,332 $5,576 (2)%(4)%Performance-based income and other1139 43 644 N/M(93)%Net revenues5,370 5,375 6,220 — %(14)%Compensation and benefits2,217 2,273 2,373 (2)%(4)%Non-compensation expenses2,311 2,295 2,169 1 %6 %Total non-interest expenses4,528 4,568 4,542 (1)%1 %Income before provision for income taxes842 807 1,678 4 %(52)%Provision for income taxes199 162 356 23 %(54)%Net income643 645 1,322 — %(51)%Net income applicable to noncontrolling interests4 (15)(25)127 %40 %Net income applicable to Morgan Stanley$639 $660 $1,347 (3)%(51)% Asset management and related fees Performance-based income and other1 Net income applicable to noncontrolling interests\"" ], "current_body": "% Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%", "prior_body": "% Change$ in millions20222021202020222021RevenuesAdvisory$2,946 $3,487 $2,008 (16)%74 %Equity851 4,437 3,092 (81)%43 %Fixed income1,438 2,348 2,104 (39)%12 %Total Underwriting2,289 6,785 5,196 (66)%31 %Total Investment banking5,235 10,272 7,204 (49)%43 %Equity10,769 11,435 9,921 (6)%15 %Fixed income9,022 7,516 8,847 20 %(15)%Other(633)610 504 N/M21 %Net revenues24,393 29,833 26,476 (18)%13 %Provision for credit losses211 (7)731 N/M(101)%Compensation and benefits8,246 9,165 8,342 (10)%10 %Non-compensation expenses9,221 8,861 8,252 4 %7 %Total non-interest expenses17,467 18,026 16,594 (3)%9 %Income before provision for income taxes6,715 11,814 9,151 (43)%29 %Provision for income taxes1,308 2,746 2,040 (52)%35 %Net income5,407 9,068 7,111 (40)%28 %Net income applicable to noncontrolling interests165 111 99 49 %12 %Net income applicable to Morgan Stanley$5,242 $8,957 $7,012 (41)%28 %" }, { "status": "MODIFIED", "current_title": "RWA Rollforward", "prior_title": "RWA Rollforward", "similarity_score": 0.606, "confidence": "medium", "key_changes": [ "Reworded sentence: \"$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2022$397,275 $285,638 Change related to the following items:Derivatives6,065 660 Securities financing transactions2,924 (354)Investment securities(1,316)385 Commitments, guarantees and loans(2,606)6,903 Equity investments1,621 1,964 Other credit risk3,768 2,662 Total change in credit risk RWA$10,456 $12,220 Balance at December 31, 2023$407,731 $297,858 Market risk RWABalance at December 31, 2022$50,574 $50,563 Change related to the following items:Regulatory VaR(3,946)(3,946)Regulatory stressed VaR(5,017)(5,017)Incremental risk charge94 94 Comprehensive risk measure341 231 Specific risk6,276 6,276 Total change in market risk RWA$(2,252)$(2,362)Balance at December 31, 2023$48,322 $48,201 Operational risk RWABalance at December 31, 2022N/A$102,605 Change in operational risk RWAN/A(510)Balance at December 31, 2023N/A$102,095 Total RWA$456,053 $448,154 Regulatory VaR—VaR for regulatory capital requirements In 2023, Credit risk RWA increased under the Standardized and Advanced Approaches.\"" ], "current_body": "$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2022$397,275 $285,638 Change related to the following items:Derivatives6,065 660 Securities financing transactions2,924 (354)Investment securities(1,316)385 Commitments, guarantees and loans(2,606)6,903 Equity investments1,621 1,964 Other credit risk3,768 2,662 Total change in credit risk RWA$10,456 $12,220 Balance at December 31, 2023$407,731 $297,858 Market risk RWABalance at December 31, 2022$50,574 $50,563 Change related to the following items:Regulatory VaR(3,946)(3,946)Regulatory stressed VaR(5,017)(5,017)Incremental risk charge94 94 Comprehensive risk measure341 231 Specific risk6,276 6,276 Total change in market risk RWA$(2,252)$(2,362)Balance at December 31, 2023$48,322 $48,201 Operational risk RWABalance at December 31, 2022N/A$102,605 Change in operational risk RWAN/A(510)Balance at December 31, 2023N/A$102,095 Total RWA$456,053 $448,154 Regulatory VaR—VaR for regulatory capital requirements In 2023, Credit risk RWA increased under the Standardized and Advanced Approaches. Under the Standardized Approach, the increase was primarily driven by higher derivatives, higher securities financing transactions, higher equity investments, as well as an increase in Other credit risk driven by higher deferred tax assets and securitizations. These increases were partially offset by decreases in lending activity. Under the Advanced Approach, the increase was primarily driven by growth in Corporate lending, higher equity investments, higher derivatives, as well as increase in Other credit risk driven by higher deferred tax assets and securitizations. Market risk RWA decreased in 2023 under both the Standardized and Advanced Approaches, primarily due to lower Regulatory VaR and stressed VaR driven by reductions in macro and commodities businesses, partially offset by higher Specific risk charges on securitization and non-securitization standardized charges. Operational risk RWA in 2023 remained relatively unchanged.", "prior_body": "$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2021$416,502 $285,247 Change related to the following items:Derivatives(21,332)1,738 Securities financing transactions(8,217)24 Investment securities(2,853)(8,348)Commitments, guarantees and loans12,698 4,881 Equity investments(3,738)(3,909)Other credit risk4,215 6,005 Total change in credit risk RWA$(19,227)$391 Balance at December 31, 2022$397,275 $285,638 Market risk RWABalance at December 31, 2021$55,419 $55,419 Change related to the following items:Regulatory VaR3,700 3,700 Regulatory stressed VaR1,585 1,585 Incremental risk charge(4,641)(4,641)Comprehensive risk measure(281)(292)Specific risk(5,208)(5,208)Total change in market risk RWA$(4,845)$(4,856)Balance at December 31, 2022$50,574 $50,563 Operational risk RWABalance at December 31, 2021N/A$95,083 Change in operational risk RWAN/A7,522 Balance at December 31, 2022N/A$102,605 Total RWA$447,849 $438,806 Regulatory VaR—VaR for regulatory capital requirements In 2022, Credit risk RWA decreased under the Standardized Approach but was relatively unchanged under the Advanced Approach. Under the Standardized Approach, the decrease was primarily driven by lower equity, commodities, and credit Derivatives as well as lower Securities financing transactions from margin lending, partially offset by lending growth. Under the Advanced Approach, lending growth, higher foreign exchange Derivatives exposures and higher other assets exposures were offset by lower Investment securities and Equity Investments. Market risk RWA decreased in 2022 under both the Standardized and Advanced Approaches primarily driven by lower Incremental Risk Charge driven by exposure reduction in the Fixed Income business and lower Specific risk securitization and non-securitization standardized charges, partially offset by higher Regulatory VaR. The increase in Operational risk RWA in 2022 reflects higher legal expenses and execution-related losses." }, { "status": "MODIFIED", "current_title": "Investment Banking Revenues", "prior_title": "Investment Banking Revenues", "similarity_score": 0.6, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Net revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.\"" ], "current_body": "Net revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues. •Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes. •Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings. •Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances. Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates.See “Investment Banking Volumes” herein.Equity, Fixed Income and Other Net RevenuesEquity and Fixed Income Net Revenues 2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 1.Includes Commissions and fees and Asset management revenues.2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues.EquityNet revenues of $9,986 million in 2023 decreased 7% compared with the prior year, reflecting decreases in Financing and Execution services.•Financing revenues decreased primarily due to higher funding and liquidity costs compared with the prior year.•Execution services revenues decreased primarily due to lower gains on inventory held to facilitate client activity in derivatives and cash equities and lower client activity in cash equities, partially offset by mark-to-market gains on business-related investments compared with losses in the prior year.Fixed IncomeNet revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products.•Global macro products revenues decreased primarily due to a decline in foreign exchange products.•Credit products revenues decreased primarily due to lower client activity across products. Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates. See “Investment Banking Volumes” herein.", "prior_body": "Investment banking revenues of $5,235 million in 2022 decreased 49% compared with the prior year, primarily reflecting a decrease in underwriting revenues in line with market levels, reflecting a significant decline in global volumes. •Advisory revenues decreased primarily due to fewer completed M&A transactions. •Equity underwriting revenues decreased on lower volumes, with lower revenues across all products, notably in initial public offerings, secondary block share trades and follow-on offerings. •Fixed income underwriting revenues decreased primarily due to lower bond and loan issuances. In 2022, Investment Banking operated in a global economic environment characterized, particularly in the second half of 2022, by significantly reduced M&A and underwriting activity in comparison to 2021 levels, amid elevated inflation, rising interest rates and market volatility. To the extent global announced M&A transactions and underwriting volumes remain at levels similar to those in the second half of 2022, we would expect these market conditions to continue to have an adverse impact on Investment Banking revenues compared to our performance in 2021.See “Investment Banking Volumes” herein.Equity, Fixed Income and Other Net RevenuesEquity and Fixed Income Net Revenues 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 2020$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$3,736 $439 $342 $4 $4,521 Execution services2,882 2,658 (256)116 5,400 Total Equity$6,618 $3,097 $86 $120 $9,921 Total Fixed income$6,841 $299 $1,696 $11 $8,847 1.Includes Commissions and fees and Asset management revenues.2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues.EquityNet revenues of $10,769 million in 2022 decreased 6% compared with the prior year, reflecting a decrease in execution services driven by markdowns on certain business-related investments and lower levels of client activity amid challenging market conditions, partially offset by an increase in financing.•Financing revenues increased primarily due to the absence of a loss from a credit event for a single client in the prior year period, partially offset by the impact of lower average client balances.•Execution services revenues decreased primarily due to mark-to-market losses on certain business-related investments compared to gains in the fourth quarter of 2021, lower client activity, as well as the impact of market conditions on inventory held to facilitate client activity in In 2022, Investment Banking operated in a global economic environment characterized, particularly in the second half of 2022, by significantly reduced M&A and underwriting activity in comparison to 2021 levels, amid elevated inflation, rising interest rates and market volatility. To the extent global announced M&A transactions and underwriting volumes remain at levels similar to those in the second half of 2022, we would expect these market conditions to continue to have an adverse impact on Investment Banking revenues compared to our performance in 2021. See “Investment Banking Volumes” herein." }, { "status": "MODIFIED", "current_title": "Non-Interest Expenses", "prior_title": "Non-interest Expenses", "similarity_score": 0.598, "confidence": "low", "key_changes": [ "Reworded sentence: \"($ in millions) •Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation.\"" ], "current_body": "($ in millions) •Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation. 2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023. •Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter.", "prior_body": "Non-interest expenses of $17,467 million in 2022 decreased 3% compared with the prior year due to lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses. •Compensation and benefits expenses decreased in the current year primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price, and lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses.•Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology.Income Tax ItemsThe effective tax rate of 19.5% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses. •Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology." }, { "status": "MODIFIED", "current_title": "Selected Financial Information and Other Statistical Data", "prior_title": "Selected Financial Information and Other Statistical Data", "similarity_score": 0.598, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in millions, except per share data202320222021Consolidated resultsNet revenues$54,143 $53,668 $59,755 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Earnings per diluted common share$5.18 $6.15 $8.03 $ in millions, except per share data Consolidated financial measuresExpense efficiency ratio177 %73 %67 %ROE29.4 %11.2 %15.0 %ROTCE2,312.8 %15.3 %19.8 %Pre-tax margin422 %26 %33 %Effective tax rate 21.9 %20.7 %23.1 %Pre-tax margin by segment4Institutional Securities19 %28 %40 %Wealth Management25 %27 %25 %Investment Management16 %15 %27 % Expense efficiency ratio1 ROE2 ROTCE2,3 Pre-tax margin4\"" ], "current_body": "$ in millions, except per share data202320222021Consolidated resultsNet revenues$54,143 $53,668 $59,755 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Earnings per diluted common share$5.18 $6.15 $8.03 $ in millions, except per share data Consolidated financial measuresExpense efficiency ratio177 %73 %67 %ROE29.4 %11.2 %15.0 %ROTCE2,312.8 %15.3 %19.8 %Pre-tax margin422 %26 %33 %Effective tax rate 21.9 %20.7 %23.1 %Pre-tax margin by segment4Institutional Securities19 %28 %40 %Wealth Management25 %27 %25 %Investment Management16 %15 %27 % Expense efficiency ratio1 ROE2 ROTCE2,3 Pre-tax margin4", "prior_body": "$ in millions, except per share data202220212020Consolidated resultsNet revenues$53,668 $59,755 $48,757 Earnings applicable to Morgan Stanley common shareholders$10,540 $14,566 $10,500 Earnings per diluted common share$6.15 $8.03 $6.46 Consolidated financial measuresExpense efficiency ratio173 %67 %69 %Adjusted expense efficiency ratio1,272 %66 %68 %ROE311.2 %15.0 %13.1 %Adjusted ROE2,311.6 %15.3 %13.3 %ROTCE2,315.3 %19.8 %15.2 %Adjusted ROTCE2,315.7 %20.2 %15.4 %Pre-tax margin426 %33 %30 %Effective tax rate 20.7 %23.1 %22.5 %Pre-tax margin by segment4Institutional Securities28 %40 %35 %Wealth Management27 %25 %23 %Wealth Management, adjusted228 %27 %24 %Investment Management15 %27 %23 %Investment Management, adjusted217 %29 %23 % Expense efficiency ratio1 Adjusted expense efficiency ratio1,2 ROE3 Adjusted ROE2,3 ROTCE2,3 Adjusted ROTCE2,3 Pre-tax margin4" }, { "status": "MODIFIED", "current_title": "Asset Management", "prior_title": "Transactional Revenues", "similarity_score": 0.594, "confidence": "low", "key_changes": [ "Reworded sentence: \"Asset management revenues of $14,019 million in 2023 increased 1% compared with the prior year, reflecting the cumulative impact of positive fee-based flows, partially offset by a reduction driven by changes in client and product mix and lower average fee-based client asset levels due to declines in the markets.\"" ], "current_body": "Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products. Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested. Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis. Net InterestInterest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding. OtherOther revenues for Institutional Securities include revenues and losses from equity method investments, fees earned in association with lending activities, mark-to-market gains and losses on loans and lending commitments held for sale, as well as gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment loans and lending commitments.Other revenues for Wealth Management include realized gains and losses on AFS securities, account handling fees, referral fees and other miscellaneous revenues.Provision for Credit LossesThe Provision for credit losses includes the provision for credit losses for loans and lending commitments held for investment.Institutional Securities—Fixed Income and EquitiesFixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis.", "prior_body": "Transactional revenues of $2,473 million in 2022 decreased 42% compared with the prior year, primarily due to losses on December 2022 Form 10-K32 December 2022 Form 10-K32 December 2022 Form 10-K32 32 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents investments associated with certain employee deferred cash-based compensation plans and lower client activity in equities. For further information on the impact of investments associated with certain employee deferred cash-based compensation plans, see “Selected Non-GAAP Financial Information” herein. Net InterestNet interest revenues of $7,429 million in 2022 increased 38% compared with the prior year, primarily due to net effect of higher interest rates and growth in bank lending.The level and pace of interest rate changes and other macroeconomic factors may impact client demand for loans as well as preferences for cash allocation to other products, potentially resulting in changes in the deposit mix and associated interest expense. As such net interest income may be impacted in future periods.Non-interest ExpensesNon-interest expenses of $17,765 million in 2022 decreased 2% compared with the prior year, as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses.•Compensation and benefits expenses decreased, primarily due to lower expenses related to certain deferred cash-based compensation plans linked to investment performance and a decrease in the formulaic payout to Wealth Management representatives driven by lower compensable revenues, partially offset by the impact of higher headcount. For further information on the impact of expenses related to certain employee deferred cash-based compensation plans linked to investment performance, see “Selected Non-GAAP Financial Information” herein.•Non-compensation expenses increased, primarily driven by spend on technology and higher marketing and business development costs.Fee-Based Client Assets Rollforwards$ in billionsAtDecember 31,2021 Inflows1OutflowsMarketImpactAtDecember 31,2022 Separately managed2$479 $141 $(25)$(94)$501 Unified managed467 76 (50)(85)408 Advisor211 29 (35)(38)167 Portfolio manager636 94 (67)(111)552 Subtotal$1,793 $340 $(177)$(328)$1,628 Cash management46 38 (34)— 50 Total fee-based client assets$1,839 $378 $(211)$(328)$1,678 $ in billionsAtDecember 31,2020 Inflows3OutflowsMarketImpactAtDecember 31,2021 Separately managed2$359 $86 $(20)$54 $479 Unified managed379 100 (54)42 467 Advisor177 42 (30)22 211 Portfolio manager509 113 (58)72 636 Subtotal$1,424 $341 $(162)$190 $1,793 Cash management48 30 (32)— 46 Total fee-based client assets$1,472 $371 $(194)$190 $1,839 $ in billionsAtDecember 31,2019 InflowsOutflowsMarketImpactAtDecember 31,2020 Separately managed2$322 $48 $(25)$14 $359 Unified managed313 63 (43)46 379 Advisor155 33 (28)17 177 Portfolio manager435 86 (57)45 509 Subtotal$1,225 $230 $(153)$122 $1,424 Cash management42 28 (22)— 48 Total fee-based client assets$1,267 $258 $(175)$122 $1,472 1.Includes $75 billion of fee-based assets acquired in an asset acquisition in the first quarter of 2022, reflected in Separately managed.2.Includes non-custody account values reflecting prior quarter-end balances due to a lag in the reporting of asset values by third-party custodians.3.Includes $43 billion of fee-based assets acquired in an asset acquisition in the third quarter of 2021, reflected in Separately managed.Average Fee Rates1Fee rate in bps202220212020Separately managed12 14 14 Unified managed94 95 99 Advisor81 82 85 Portfolio manager92 93 94 Subtotal66 72 73 Cash management6 5 5 Total fee-based client assets65 70 70 1.Based on Asset management revenues related to advisory services associated with fee-based assets.•Inflows—include new accounts, account transfers, deposits, dividends and interest.•Outflows—include closed or terminated accounts, account transfers, withdrawals and client fees.•Market impact—includes realized and unrealized gains and losses on portfolio investments.•Separately managed—accounts by which third-party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset manager. Only one third-party asset manager strategy can be held per account. investments associated with certain employee deferred cash-based compensation plans and lower client activity in equities. For further information on the impact of investments associated with certain employee deferred cash-based compensation plans, see “Selected Non-GAAP Financial Information” herein. Net InterestNet interest revenues of $7,429 million in 2022 increased 38% compared with the prior year, primarily due to net effect of higher interest rates and growth in bank lending.The level and pace of interest rate changes and other macroeconomic factors may impact client demand for loans as well as preferences for cash allocation to other products, potentially resulting in changes in the deposit mix and associated interest expense. As such net interest income may be impacted in future periods.Non-interest ExpensesNon-interest expenses of $17,765 million in 2022 decreased 2% compared with the prior year, as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses.•Compensation and benefits expenses decreased, primarily due to lower expenses related to certain deferred cash-based compensation plans linked to investment performance and a decrease in the formulaic payout to Wealth Management representatives driven by lower compensable revenues, partially offset by the impact of higher headcount. For further information on the impact of expenses related to certain employee deferred cash-based compensation plans linked to investment performance, see “Selected Non-GAAP Financial Information” herein.•Non-compensation expenses increased, primarily driven by spend on technology and higher marketing and business development costs. investments associated with certain employee deferred cash-based compensation plans and lower client activity in equities. For further information on the impact of investments associated with certain employee deferred cash-based compensation plans, see “Selected Non-GAAP Financial Information” herein." }, { "status": "MODIFIED", "current_title": "Regulatory Capital", "prior_title": "Regulatory Capital", "similarity_score": 0.591, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 Common shareholders’ equity Impact of CECL transition Other adjustments and deductions1 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.\"", "Reworded sentence: \"The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S.\"" ], "current_body": "$ in millionsAtDecember 31,2023AtDecember 31,2022 ChangeCommon Equity Tier 1 capitalCommon shareholders’ equity$90,288 $91,391 $(1,103)Regulatory adjustments and deductions:Net goodwill(16,394)(16,393)(1)Net intangible assets(5,509)(6,048)539 Impact of CECL transition124 185 (61)Other adjustments and deductions1939 (465)1,404 Total Common Equity Tier 1 capital$69,448 $68,670 $778 Additional Tier 1 capitalPreferred stock$8,750 $8,750 $— Noncontrolling interests758 552 206 Additional Tier 1 capital$9,508 $9,302 $206 Deduction for investments in covered funds(773)(781)8 Total Tier 1 capital$78,183 $77,191 $992 Standardized Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible ACL2,051 1,613 438 Other adjustments and deductions(120)(75)(45)Total Standardized Tier 2 capital$10,691 $9,384 $1,307 Total Standardized capital$88,874 $86,575 $2,299 Advanced Tier 2 capitalSubordinated debt$8,760 $7,846 $914 Eligible credit reserves1,367 1,197 170 Other adjustments and deductions(120)(75)(45)Total Advanced Tier 2 capital$10,007 $8,968 $1,039 Total Advanced capital$88,190 $86,159 $2,031 Common shareholders’ equity Impact of CECL transition Other adjustments and deductions1 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets. 55December 2023 Form 10-K 55December 2023 Form 10-K 55December 2023 Form 10-K 55 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents RWA Rollforward$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2022$397,275 $285,638 Change related to the following items:Derivatives6,065 660 Securities financing transactions2,924 (354)Investment securities(1,316)385 Commitments, guarantees and loans(2,606)6,903 Equity investments1,621 1,964 Other credit risk3,768 2,662 Total change in credit risk RWA$10,456 $12,220 Balance at December 31, 2023$407,731 $297,858 Market risk RWABalance at December 31, 2022$50,574 $50,563 Change related to the following items:Regulatory VaR(3,946)(3,946)Regulatory stressed VaR(5,017)(5,017)Incremental risk charge94 94 Comprehensive risk measure341 231 Specific risk6,276 6,276 Total change in market risk RWA$(2,252)$(2,362)Balance at December 31, 2023$48,322 $48,201 Operational risk RWABalance at December 31, 2022N/A$102,605 Change in operational risk RWAN/A(510)Balance at December 31, 2023N/A$102,095 Total RWA$456,053 $448,154 Regulatory VaR—VaR for regulatory capital requirementsIn 2023, Credit risk RWA increased under the Standardized and Advanced Approaches. Under the Standardized Approach, the increase was primarily driven by higher derivatives, higher securities financing transactions, higher equity investments, as well as an increase in Other credit risk driven by higher deferred tax assets and securitizations. These increases were partially offset by decreases in lending activity. Under the Advanced Approach, the increase was primarily driven by growth in Corporate lending, higher equity investments, higher derivatives, as well as increase in Other credit risk driven by higher deferred tax assets and securitizations.Market risk RWA decreased in 2023 under both the Standardized and Advanced Approaches, primarily due to lower Regulatory VaR and stressed VaR driven by reductions in macro and commodities businesses, partially offset by higher Specific risk charges on securitization and non-securitization standardized charges.Operational risk RWA in 2023 remained relatively unchanged.G-SIB Capital SurchargeWe and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and complexity and substitutability (“Method 1”) or use of short-term wholesale funding (“Method 2”), whichever is higher.Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company RequirementsThe Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used (see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” and “Risk Factors—Legal, Regulatory and Compliance Risk”).These TLAC and eligible LTD requirements include various restrictions, such as requiring eligible LTD to: be issued by the covered BHC; be unsecured; have a maturity of one year or more from the date of issuance; and not contain certain embedded features, such as a principal or redemption amount subject to reduction based on the performance of an asset, entity or index, or a similar feature. In addition, the requirements provide permanent grandfathering for debt instruments issued prior to December 31, 2016 that would be eligible LTD but for having impermissible acceleration clauses or being governed by foreign law. A covered BHC is also required to maintain minimum external TLAC equal to the greater of (i) 18% of total RWA or (ii) 7.5% of its total leverage exposure (the denominator of its SLR). Covered BHCs must also meet a minimum external LTD requirement equal to the greater of (i) total RWA multiplied by the sum of 6% plus the higher of the Method 1 or Method 2 G-SIB capital surcharge applicable to the Parent Company or (ii) 4.5% of its total leverage exposure. TLAC buffer requirements are imposed on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. RWA Rollforward$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2022$397,275 $285,638 Change related to the following items:Derivatives6,065 660 Securities financing transactions2,924 (354)Investment securities(1,316)385 Commitments, guarantees and loans(2,606)6,903 Equity investments1,621 1,964 Other credit risk3,768 2,662 Total change in credit risk RWA$10,456 $12,220 Balance at December 31, 2023$407,731 $297,858 Market risk RWABalance at December 31, 2022$50,574 $50,563 Change related to the following items:Regulatory VaR(3,946)(3,946)Regulatory stressed VaR(5,017)(5,017)Incremental risk charge94 94 Comprehensive risk measure341 231 Specific risk6,276 6,276 Total change in market risk RWA$(2,252)$(2,362)Balance at December 31, 2023$48,322 $48,201 Operational risk RWABalance at December 31, 2022N/A$102,605 Change in operational risk RWAN/A(510)Balance at December 31, 2023N/A$102,095 Total RWA$456,053 $448,154 Regulatory VaR—VaR for regulatory capital requirementsIn 2023, Credit risk RWA increased under the Standardized and Advanced Approaches. Under the Standardized Approach, the increase was primarily driven by higher derivatives, higher securities financing transactions, higher equity investments, as well as an increase in Other credit risk driven by higher deferred tax assets and securitizations. These increases were partially offset by decreases in lending activity. Under the Advanced Approach, the increase was primarily driven by growth in Corporate lending, higher equity investments, higher derivatives, as well as increase in Other credit risk driven by higher deferred tax assets and securitizations.Market risk RWA decreased in 2023 under both the Standardized and Advanced Approaches, primarily due to lower Regulatory VaR and stressed VaR driven by reductions in macro and commodities businesses, partially offset by higher Specific risk charges on securitization and non-securitization standardized charges.Operational risk RWA in 2023 remained relatively unchanged.G-SIB Capital SurchargeWe and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size,", "prior_body": "$ in millionsAtDecember 31,2022AtDecember 31,2021 ChangeCommon Equity Tier 1 capitalCommon stock and surplus$2,782 $11,361 $(8,579)Retained earnings95,047 89,679 5,368 AOCI(6,253)(3,102)(3,151)Regulatory adjustments and deductions:Net goodwill(16,393)(16,641)248 Net intangible assets(6,048)(6,704)656 Other adjustments and deductions1(465)1,149 (1,614)Total Common Equity Tier 1 capital$68,670 $75,742 $(7,072)Additional Tier 1 capitalPreferred stock$8,750 $7,750 $1,000 Noncontrolling interests552 562 (10)Additional Tier 1 capital$9,302 $8,312 $990 Deduction for investments in covered funds(781)(706)(75)Total Tier 1 capital$77,191 $83,348 $(6,157)Standardized Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible ACL1,613 1,155 458 Other adjustments and deductions(75)54 (129)Total Standardized Tier 2 capital$9,384 $9,818 $(434)Total Standardized capital$86,575 $93,166 $(6,591)Advanced Tier 2 capitalSubordinated debt$7,846 $8,609 $(763)Eligible credit reserves1,197 916 281 Other adjustments and deductions(75)54 (129)Total Advanced Tier 2 capital$8,968 $9,579 $(611)Total Advanced capital$86,159 $92,927 $(6,768) Other adjustments and deductions1 1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets. RWA Rollforward$ in millionsStandardizedAdvancedCredit risk RWABalance at December 31, 2021$416,502 $285,247 Change related to the following items:Derivatives(21,332)1,738 Securities financing transactions(8,217)24 Investment securities(2,853)(8,348)Commitments, guarantees and loans12,698 4,881 Equity investments(3,738)(3,909)Other credit risk4,215 6,005 Total change in credit risk RWA$(19,227)$391 Balance at December 31, 2022$397,275 $285,638 Market risk RWABalance at December 31, 2021$55,419 $55,419 Change related to the following items:Regulatory VaR3,700 3,700 Regulatory stressed VaR1,585 1,585 Incremental risk charge(4,641)(4,641)Comprehensive risk measure(281)(292)Specific risk(5,208)(5,208)Total change in market risk RWA$(4,845)$(4,856)Balance at December 31, 2022$50,574 $50,563 Operational risk RWABalance at December 31, 2021N/A$95,083 Change in operational risk RWAN/A7,522 Balance at December 31, 2022N/A$102,605 Total RWA$447,849 $438,806 Regulatory VaR—VaR for regulatory capital requirementsIn 2022, Credit risk RWA decreased under the Standardized Approach but was relatively unchanged under the Advanced Approach. Under the Standardized Approach, the decrease was primarily driven by lower equity, commodities, and credit Derivatives as well as lower Securities financing transactions from margin lending, partially offset by lending growth. Under the Advanced Approach, lending growth, higher foreign exchange Derivatives exposures and higher other assets exposures were offset by lower Investment securities and Equity Investments.Market risk RWA decreased in 2022 under both the Standardized and Advanced Approaches primarily driven by lower Incremental Risk Charge driven by exposure reduction in the Fixed Income business and lower Specific risk securitization and non-securitization standardized charges, partially offset by higher Regulatory VaR.The increase in Operational risk RWA in 2022 reflects higher legal expenses and execution-related losses.G-SIB Capital SurchargeWe and other U.S. G-SIBs are subject to an additional risk-based capital surcharge, the G-SIB capital surcharge, which must be satisfied using Common Equity Tier 1 capital and which functions as an extension of the capital conservation buffer. The surcharge is calculated based on the G-SIB’s size, interconnectedness, cross-jurisdictional activity, and" }, { "status": "MODIFIED", "current_title": "Fixed Income", "prior_title": "2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022", "similarity_score": 0.587, "confidence": "low", "key_changes": [ "Reworded sentence: \"Net revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products.\"" ], "current_body": "Net revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products. •Global macro products revenues decreased primarily due to a decline in foreign exchange products. •Credit products revenues decreased primarily due to lower client activity across products. 37December 2023 Form 10-K 37December 2023 Form 10-K 37December 2023 Form 10-K 37 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents •Commodities products and other fixed income revenues decreased compared to elevated results in the prior year, primarily due to lower gains on inventory held to facilitate client activity and lower client activity.Other Net RevenuesOther net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs.Provision for Credit LossesIn 2023, the Provision for credit losses on loans and lending commitments of $401 million was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $211 million in 2022 was primarily driven by portfolio growth and deterioration in the macroeconomic outlook.For further information on the Provision for credit losses, see “Credit Risk” herein.Non-Interest ExpensesNon-interest expenses of $18,183 million in 2023 increased 4% compared with the prior year due to higher Non-compensation expenses and Compensation and benefits expenses. •Compensation and benefits expenses increased primarily due to higher expenses related to DCP and higher stock-based compensation expenses driven by the Firm’s share price movement in the prior year, partially offset by lower expenses related to outstanding deferred equity compensation.•Non-compensation expenses increased primarily due to increased spend on technology, an FDIC special assessment of $121 million, higher legal expenses, including $249 million related to a specific matter, higher execution-related and marketing and business development expenses. •Commodities products and other fixed income revenues decreased compared to elevated results in the prior year, primarily due to lower gains on inventory held to facilitate client activity and lower client activity.Other Net RevenuesOther net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs.Provision for Credit LossesIn 2023, the Provision for credit losses on loans and lending commitments of $401 million was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $211 million in 2022 was primarily driven by portfolio growth and deterioration in the macroeconomic outlook.For further information on the Provision for credit losses, see “Credit Risk” herein.Non-Interest ExpensesNon-interest expenses of $18,183 million in 2023 increased 4% compared with the prior year due to higher Non-compensation expenses and Compensation and benefits expenses. •Compensation and benefits expenses increased primarily due to higher expenses related to DCP and higher stock-based compensation expenses driven by the Firm’s share price movement in the prior year, partially offset by lower expenses related to outstanding deferred equity compensation.•Non-compensation expenses increased primarily due to increased spend on technology, an FDIC special assessment of $121 million, higher legal expenses, including $249 million related to a specific matter, higher execution-related and marketing and business development expenses. •Commodities products and other fixed income revenues decreased compared to elevated results in the prior year, primarily due to lower gains on inventory held to facilitate client activity and lower client activity.", "prior_body": "Fees1 Net Interest2 All Other3 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 Fees1 Net Interest2 All Other3 2020$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$3,736 $439 $342 $4 $4,521 Execution services2,882 2,658 (256)116 5,400 Total Equity$6,618 $3,097 $86 $120 $9,921 Total Fixed income$6,841 $299 $1,696 $11 $8,847 Fees1 Net Interest2 All Other3 1.Includes Commissions and fees and Asset management revenues. 2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues. Equity Net revenues of $10,769 million in 2022 decreased 6% compared with the prior year, reflecting a decrease in execution services driven by markdowns on certain business-related investments and lower levels of client activity amid challenging market conditions, partially offset by an increase in financing. •Financing revenues increased primarily due to the absence of a loss from a credit event for a single client in the prior year period, partially offset by the impact of lower average client balances. •Execution services revenues decreased primarily due to mark-to-market losses on certain business-related investments compared to gains in the fourth quarter of 2021, lower client activity, as well as the impact of market conditions on inventory held to facilitate client activity in December 2022 Form 10-K30 December 2022 Form 10-K30 December 2022 Form 10-K30 30 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents cash equities, partially offset by the absence of trading losses related to the aforementioned credit event.Fixed IncomeNet revenues of $9,022 million in 2022 increased 20% compared with the prior year, primarily reflecting an increase in global macro products, which benefited from strong client engagement and increased client flow activity in an environment characterized by inflationary pressures, central bank actions and fiscal activity driving higher volatility.•Global macro products revenues increased in rates and foreign exchange products, primarily due to the positive impact of market conditions on inventory held to facilitate client activity and increased client activity.•Credit products revenues decreased, reflecting the impact of widening credit spreads and market volatility, primarily due to the impact of market conditions on inventory held to facilitate client activity in securitized products. •Commodities products and other fixed income revenues increased primarily due to higher client activity in Commodities.Other Net RevenuesOther net revenues reflected a loss of $633 million in 2022 compared to a gain in the prior year, primarily due to mark-to-market losses on corporate loans held for sale inclusive of hedges of $876 million in 2022 compared to $195 million in 2021, partially offset by higher net interest income and fees of $701 million in 2022 compared with $509 million in 2021. Also contributing to the decline were losses in 2022 compared with gains in 2021 on investments associated with certain employee deferred cash-based compensation plans and lower results from our Japanese joint venture, MUMSS. Provision for Credit LossesIn 2022, the Provision for credit losses on loans and lending commitments of $211 million was driven by portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments was a net release of $7 million in 2021, primarily as the impact of changes in loan quality mix were offset by portfolio growth.For further information on the Provision for credit losses, see “Credit Risk” herein.Non-interest ExpensesNon-interest expenses of $17,467 million in 2022 decreased 3% compared with the prior year due to lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses. •Compensation and benefits expenses decreased in the current year primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price, and lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses.•Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology.Income Tax ItemsThe effective tax rate of 19.5% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. cash equities, partially offset by the absence of trading losses related to the aforementioned credit event.Fixed IncomeNet revenues of $9,022 million in 2022 increased 20% compared with the prior year, primarily reflecting an increase in global macro products, which benefited from strong client engagement and increased client flow activity in an environment characterized by inflationary pressures, central bank actions and fiscal activity driving higher volatility.•Global macro products revenues increased in rates and foreign exchange products, primarily due to the positive impact of market conditions on inventory held to facilitate client activity and increased client activity.•Credit products revenues decreased, reflecting the impact of widening credit spreads and market volatility, primarily due to the impact of market conditions on inventory held to facilitate client activity in securitized products. •Commodities products and other fixed income revenues increased primarily due to higher client activity in Commodities.Other Net RevenuesOther net revenues reflected a loss of $633 million in 2022 compared to a gain in the prior year, primarily due to mark-to-market losses on corporate loans held for sale inclusive of hedges of $876 million in 2022 compared to $195 million in 2021, partially offset by higher net interest income and fees of $701 million in 2022 compared with $509 million in 2021. Also contributing to the decline were losses in 2022 compared with gains in 2021 on investments associated with certain employee deferred cash-based compensation plans and lower results from our Japanese joint venture, MUMSS. Provision for Credit LossesIn 2022, the Provision for credit losses on loans and lending commitments of $211 million was driven by portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments was a net release of $7 million in 2021, primarily as the impact of changes in loan quality mix were offset by portfolio growth.For further information on the Provision for credit losses, see “Credit Risk” herein.Non-interest ExpensesNon-interest expenses of $17,467 million in 2022 decreased 3% compared with the prior year due to lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses. •Compensation and benefits expenses decreased in the current year primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price, and cash equities, partially offset by the absence of trading losses related to the aforementioned credit event." }, { "status": "MODIFIED", "current_title": "Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.", "prior_title": "Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.", "similarity_score": 0.581, "confidence": "low", "key_changes": [ "Reworded sentence: \"We compete with various other companies in attracting and retaining qualified 23December 2023 Form 10-K 23December 2023 Form 10-K 23December 2023 Form 10-K 23 Table of Contents Table of Contents Table of Contents and skilled personnel.\"" ], "current_body": "Our people are our most important asset. We compete with various other companies in attracting and retaining qualified 23December 2023 Form 10-K 23December 2023 Form 10-K 23December 2023 Form 10-K 23 Table of Contents Table of Contents Table of Contents and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees or successfully transition key roles, or do so at levels or in forms necessary to maintain our competitive position, our performance, including our competitive position and results of operations, could be materially adversely affected. Our ability to attract and retain qualified and skilled personnel depends on numerous factors, some of which are outside of our control.Compensation costs required to attract and retain employees may increase or the competitive market for talent may further intensify due to factors such as low unemployment, a strong job market and changes in employees’ expectations, concerns and preferences. The financial industry has experienced and may continue to experience more stringent regulation of employee compensation than other industries, which may or may not impact competitors. These more stringent regulations have shaped our compensation practices, which could have an adverse effect on our ability to hire or retain the most qualified employees.International RiskWe are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, minimum global tax regimes, cybersecurity, data transfer and outsourcing restrictions, regulatory scrutiny regarding the use of new technologies, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability, including tensions between China and the U.S., the expansion or escalation of hostilities between Russia and Ukraine or in the Middle East or the initiation or escalation of hostilities or terrorist activity around the world and the potential associated impacts on global and local economies and our operations. In many countries, the laws and regulations applicable to the securities and financial services industries and multinational corporations are uncertain, evolving and subject to sudden change or may be inconsistent with U.S. law. It may also be difficult for us to determine the exact requirements of local laws in every market or adapt to changes in law, which could adversely impact our businesses. Our inability to remain in compliance with local laws in a particular market could have a significant and negative effect not only on our business in that market but also on our reputation generally. We are also subject to the risk that transactions we structure might not be legally enforceable in all cases.Various emerging market countries have experienced severe political, economic or financial disruptions, including significant devaluations of their currencies, defaults or potential defaults on sovereign debt, capital and currency exchange controls, high rates of inflation and low or negative growth rates in their economies. Crime and corruption, as well as issues of security and personal safety, also exist in certain of these countries. These conditions could adversely impact our businesses and increase volatility in financial markets generally.A disease pandemic, such as COVID-19 and its variants, or other widespread health emergencies, natural disasters, climate-related incidents, terrorist activities or military actions, or social or political tensions, could create economic and financial disruptions in emerging markets or in other areas of the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations and supply chain complications, that could impair our ability to manage or conduct our businesses around the world.As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by OFAC and similar multinational bodies and governmental agencies worldwide, which may be inconsistent with local law. We and certain of our subsidiaries are also subject to applicable AML and/or anti-corruption laws in the U.S., as well as in the jurisdictions in which we operate, including the Bank Secrecy Act, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. A violation of a sanction, embargo program, AML or anti-corruption law could subject us, and individual employees, to a regulatory enforcement action, as well as significant civil and criminal penalties.Acquisition, Divestiture and Joint Venture RiskWe may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances, and certain acquisitions may subject our business to new or increased risk.In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with Mitsubishi UFJ Financial Group, Inc. (“MUFG”)), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees or successfully transition key roles, or do so at levels or in forms necessary to maintain our competitive position, our performance, including our competitive position and results of operations, could be materially adversely affected. Our ability to attract and retain qualified and skilled personnel depends on numerous factors, some of which are outside of our control.Compensation costs required to attract and retain employees may increase or the competitive market for talent may further intensify due to factors such as low unemployment, a strong job market and changes in employees’ expectations, concerns and preferences. The financial industry has experienced and may continue to experience more stringent regulation of employee compensation than other industries, which may or may not impact competitors. These more stringent regulations have shaped our compensation practices, which could have an adverse effect on our ability to hire or retain the most qualified employees.International RiskWe are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, minimum global tax regimes, cybersecurity, data transfer and outsourcing restrictions, regulatory scrutiny regarding the use of new technologies, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability, including tensions between China and the U.S., the expansion or escalation of hostilities between Russia and Ukraine or in the Middle East or the initiation or escalation of hostilities or terrorist activity around the world and the potential associated impacts on global and local economies and our operations. In many countries, the laws and regulations applicable to the securities and financial services industries and multinational corporations are uncertain, evolving and subject to sudden change or may be inconsistent with U.S. law. It may also be difficult for us to determine the exact requirements of local laws in every market or adapt to changes in law, which could adversely impact our businesses. Our inability to remain in compliance with local laws in a particular market could have a significant and negative effect not only on our business in that market but also on our reputation generally. We are also subject to the risk that transactions we structure might not be legally enforceable in all cases. and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees or successfully transition key roles, or do so at levels or in forms necessary to maintain our competitive position, our performance, including our competitive position and results of operations, could be materially adversely affected. Our ability to attract and retain qualified and skilled personnel depends on numerous factors, some of which are outside of our control. Compensation costs required to attract and retain employees may increase or the competitive market for talent may further intensify due to factors such as low unemployment, a strong job market and changes in employees’ expectations, concerns and preferences. The financial industry has experienced and may continue to experience more stringent regulation of employee compensation than other industries, which may or may not impact competitors. These more stringent regulations have shaped our compensation practices, which could have an adverse effect on our ability to hire or retain the most qualified employees.", "prior_body": "Our people are our most important asset. We compete with various other companies in attracting and retaining qualified and skilled personnel. If we are unable to continue to attract, integrate and retain highly qualified employees, or do so at levels or in forms necessary to maintain our competitive position, or if compensation costs required to attract and retain employees become more expensive, or the competitive market for talent further intensifies, our performance, including our competitive position and results of operations, could be materially adversely affected. The financial industry has experienced and may continue to experience more stringent regulation of employee compensation, including limitations relating to incentive-based compensation, clawback requirements and special taxation, which could have an adverse effect on our ability to hire or retain the most qualified employees." }, { "status": "MODIFIED", "current_title": "Liquidity Coverage Ratio and Net Stable Funding Ratio", "prior_title": "Liquidity Resources by Bank and Non-Bank Legal Entities", "similarity_score": 0.576, "confidence": "low", "key_changes": [ "Removed sentence: \"Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Bank legal entitiesU.S.$134,845 $133,306 Non-U.S.6,980 7,607 Total Bank legal entities141,825 140,913 Non-Bank legal entitiesU.S.:Parent Company56,111 54,189 Non-Parent Company54,813 55,098 Total U.S.110,924 109,287 Non-U.S.59,501 57,801 Total Non-Bank legal entities170,425 167,088 Total Liquidity Resources$312,250 $308,001 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S.\"", "Reworded sentence: \"The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations.\"", "Reworded sentence: \"The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable December 2023 Form 10-K50 December 2023 Form 10-K50 December 2023 Form 10-K50 50 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents funding, which is their projected minimum funding needs, over a one-year time horizon.\"", "Reworded sentence: \"These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit.\"" ], "current_body": "We and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable December 2023 Form 10-K50 December 2023 Form 10-K50 December 2023 Form 10-K50 50 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents funding, which is their projected minimum funding needs, over a one-year time horizon. As of December 31, 2023, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.Liquidity Coverage Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Eligible HQLA1 Cash deposits with central banks$58,047 $60,163 Securities2194,970 181,010 Total Eligible HQLA1$253,017 $241,173 Net cash outflows$196,488 $190,336 LCR129 %127 %1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.Net Stable Funding RatioAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Available stable funding$555,884 $553,413 Required stable funding465,226 468,290 NSFR120 %118 %Funding ManagementWe manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded. Treasury similarly allocates interest income to businesses carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.Secured FinancingThe liquid nature of the marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded.We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities.In general, we maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity.Collateralized Financing Transactions$ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet.See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Notes 2 and 8 to the financial statements for additional information on collateralized financing transactions.In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by funding, which is their projected minimum funding needs, over a one-year time horizon. As of December 31, 2023, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.Liquidity Coverage Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Eligible HQLA1 Cash deposits with central banks$58,047 $60,163 Securities2194,970 181,010 Total Eligible HQLA1$253,017 $241,173 Net cash outflows$196,488 $190,336 LCR129 %127 %1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.Net Stable Funding RatioAverage Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Available stable funding$555,884 $553,413 Required stable funding465,226 468,290 NSFR120 %118 %Funding ManagementWe manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded. Treasury similarly allocates interest income to businesses carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.Secured FinancingThe liquid nature of the marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment funding, which is their projected minimum funding needs, over a one-year time horizon. As of December 31, 2023, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.", "prior_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Bank legal entitiesU.S.$134,845 $133,306 Non-U.S.6,980 7,607 Total Bank legal entities141,825 140,913 Non-Bank legal entitiesU.S.:Parent Company56,111 54,189 Non-Parent Company54,813 55,098 Total U.S.110,924 109,287 Non-U.S.59,501 57,801 Total Non-Bank legal entities170,425 167,088 Total Liquidity Resources$312,250 $308,001 Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors.Regulatory Liquidity FrameworkLiquidity Coverage Ratio and Net Stable Funding RatioWe and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR requires that large banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR requires large banking organizations to maintain sufficiently stable sources of funding over a one-year time horizon.As of December 31, 2022, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.Liquidity Coverage Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Eligible HQLA1 Cash deposits with central banks$52,765 $57,133 Securities2186,551 183,102 Total Eligible HQLA1$239,316 $240,235 LCR132 %136 %1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.Funding ManagementWe manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.Secured FinancingThe liquid nature of the marketable securities and short-term receivables arising principally from sales and trading Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors." }, { "status": "MODIFIED", "current_title": "By Property Type", "prior_title": "Wealth Management Loans and Lending Commitments", "similarity_score": 0.574, "confidence": "low", "key_changes": [ "Reworded sentence: \"At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 — 2 55 — 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 Loans1 LC1 Loans1 LC1 Total LC–Lending Commitments 1.\"", "Reworded sentence: \"Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients.\"", "Reworded sentence: \"The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Commercial Real Estate Loans and Lending Commitments by Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 — 454 330 — 330 Hotel400 — 400 419 — 419 Other253 — 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 LC–Lending Commitments1.Amounts include HFI loans and lending commitments.\"" ], "current_body": "At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 — 2 55 — 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 Loans1 LC1 Loans1 LC1 Total LC–Lending Commitments 1. Amounts include HFI, HFS and FVO loans and lending commitments. HFI loans are presented net of ACL. The current economic environment and changes in business and consumer behavior have adversely impacted commercial real estate borrowers due to pressure from higher interest rates, tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. While we continue to actively monitor all our loan portfolios, the commercial real estate sector remains under heightened focus given the sector’s sensitivity to economic and secular factors, credit conditions, and difficulties specific to certain property types, most notably office. As of December 31, 2023 and December 31, 2022, our lending against commercial real estate (“CRE”) properties totaled $9.4 billion and $10.3 billion within the Institutional Securities business segment, which represents 4.5% and 5.3% of total exposure reflected in the Institutional Securities Loans and Lending Commitments table above. Those CRE loans are originated for experienced sponsors and are generally secured by specific institutional CRE properties. In many cases, loans are subsequently syndicated or securitized on a full or partial basis, reducing our ongoing exposure. In addition to the amounts included in the table above, we provide certain secured lending facilities which are typically collateralized by pooled CRE mortgage loans and are included in Secured lending facilities in the Institutional Securities Loans and Lending Commitments Held for Investment table above. These secured lending facilities benefit from structural protections including cross-collateralization and diversification across property types. December 2023 Form 10-K72 December 2023 Form 10-K72 December 2023 Form 10-K72 72 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Institutional Securities Allowance for Credit Losses—Loans and Lending CommitmentsYear Ended December 31, 2023$ in millionsCorporate Secured Lending FacilitiesCREOtherTotalACL—LoansBeginning balance$235 $153 $275 $11 $674 Gross charge-offs(34)— (129)(1)(164)Recoveries1 — — — 1 Net (charge-offs) recoveries(33)— (129)(1)(163)Provision (release)37 — 314 5 356 Other2 — 3 2 7 Ending balance$241 $153 $463 $17 $874 ACL—Lending commitmentsBeginning balance$411 $51 $15 $7 $484 Provision (release)16 18 11 — 45 Other4 1 — (1)4 Ending balance$431 $70 $26 $6 $533 Total ending balance$672 $223 $489 $23 $1,407 CRE—Commercial real estateInstitutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2023 AtDecember 31,2022 Corporate3.6 %3.6 %Secured lending facilities0.4 %0.4 %Commercial real estate5.3 %3.2 %Securities-based lending and Other0.6 %0.4 %Total Institutional Securities loans1.5 %1.3 %Wealth Management Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$76,923 $7,679 $1,494 $133 $86,229 Residential real estateloans1 91 1,255 58,950 60,297 Total loans, net of ACL$76,924 $7,770 $2,749 $59,083 $146,526 Lending commitments16,312 2,937 19 344 19,612 Total exposure$93,236 $10,707 $2,768 $59,427 $166,138 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estate loans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral. Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients. Securities-based lending and Other loans are generally secured by various types of eligible collateral, including marketable securities, private investments, commercial real estate and other financial assets.Residential real estate loans consist of first- and second-lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio.Wealth Management Commercial Real Estate Loans and Lending Commitments by Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 — 454 330 — 330 Hotel400 — 400 419 — 419 Other253 — 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 LC–Lending Commitments1.Amounts include HFI loans and lending commitments. HFI loans are presented net of ACL.As of December 31, 2023 and December 31, 2022, our direct lending against CRE totaled $7.1 billion and $6.6 billion within the Wealth Management business segment, which represents 4.3% and 4.0% of total exposure reflected in the Wealth Management Loans and Lending Commitments table above, primarily included within Securities-based lending and Other loans. Such loans are originated through our private banking platform, are both secured and generally benefiting from full or partial guarantees from high or ultra-high net worth clients, which partially reduce associated credit risk. At both December 31, 2023 and December 31, 2022, greater than 95% of the CRE loans balance in the Wealth Management business segment received guarantees. All of our lending against CRE properties within Wealth Management are in the Americas region. Institutional Securities Allowance for Credit Losses—Loans and Lending CommitmentsYear Ended December 31, 2023$ in millionsCorporate Secured Lending FacilitiesCREOtherTotalACL—LoansBeginning balance$235 $153 $275 $11 $674 Gross charge-offs(34)— (129)(1)(164)Recoveries1 — — — 1 Net (charge-offs) recoveries(33)— (129)(1)(163)Provision (release)37 — 314 5 356 Other2 — 3 2 7 Ending balance$241 $153 $463 $17 $874 ACL—Lending commitmentsBeginning balance$411 $51 $15 $7 $484 Provision (release)16 18 11 — 45 Other4 1 — (1)4 Ending balance$431 $70 $26 $6 $533 Total ending balance$672 $223 $489 $23 $1,407 CRE—Commercial real estateInstitutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2023 AtDecember 31,2022 Corporate3.6 %3.6 %Secured lending facilities0.4 %0.4 %Commercial real estate5.3 %3.2 %Securities-based lending and Other0.6 %0.4 %Total Institutional Securities loans1.5 %1.3 %Wealth Management Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$76,923 $7,679 $1,494 $133 $86,229 Residential real estateloans1 91 1,255 58,950 60,297 Total loans, net of ACL$76,924 $7,770 $2,749 $59,083 $146,526 Lending commitments16,312 2,937 19 344 19,612 Total exposure$93,236 $10,707 $2,768 $59,427 $166,138 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estate loans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines", "prior_body": "At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estateloans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 Residential real estate loans At December 31, 20211 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$74,466 $8,927 $1,571 $144 $85,108 Residential real estate loans4 10 1,231 42,954 44,199 Total loans, net of ACL$74,470 $8,937 $2,802 $43,098 $129,307 Lending commitments11,894 2,467 51 282 14,694 Total exposure$86,364 $11,404 $2,853 $43,380 $144,001 At December 31, 20211 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans. Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral. Residential real estate loans consist of first and second lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment’s loan portfolio. Wealth Management Allowance for Credit Losses—Loans and Lending Commitments$ in millionsACL—Loans$111 ACL—Lending commitments18 Total at December 31, 2021129 Gross charge-offs(14)Recoveries1 Net (charge-offs) recoveries(13)Provision for credit losses69 Total at December 31, 2022$185 ACL—Loans$165 ACL—Lending commitments20 At December 31, 2022, more than 75% of Wealth Management residential real estate loans were to borrowers with “Exceptional” or “Very Good” FICO scores (i.e., exceeding 740). Additionally, Wealth Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary.Customer and Other ReceivablesMargin and Other Lending$ in millionsAtDecember 31,2022AtDecember 31,2021 Institutional Securities$16,591 $40,545 Wealth Management21,933 30,987 Total$38,524 $71,532 The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” herein. Employee LoansFor information on employee loans and related ACL, see Note 10 to the financial statements." }, { "status": "MODIFIED", "current_title": "Borrowings by Remaining Maturity at December 31, 20231", "prior_title": "Borrowings by Remaining Maturity at December 31, 20221", "similarity_score": 0.572, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $3,188 $3,188 Original maturities greater than one year2024$8,915 $11,236 $20,151 202522,030 13,493 35,523 202624,516 10,907 35,423 202719,282 6,056 25,338 202811,432 9,807 21,239 Thereafter90,635 32,235 122,870 Total greater than one year$176,810 $83,734 $260,544 Total$176,810 $86,922 $263,732 1.Original maturity in the table is generally based on contractual final maturity.\"", "Reworded sentence: \"Borrowings of $264 billion at December 31, 2023 increased from $238 billion at December 31, 2022, primarily due to issuances net of maturities and redemptions and mark-to-market adjustments on equity-linked borrowings driven by market factors.\"", "Reworded sentence: \"In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments.\"", "Reworded sentence: \"For further information on Borrowings, see Note 13 to the financial statements.\"" ], "current_body": "$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $3,188 $3,188 Original maturities greater than one year2024$8,915 $11,236 $20,151 202522,030 13,493 35,523 202624,516 10,907 35,423 202719,282 6,056 25,338 202811,432 9,807 21,239 Thereafter90,635 32,235 122,870 Total greater than one year$176,810 $83,734 $260,544 Total$176,810 $86,922 $263,732 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. Borrowings of $264 billion at December 31, 2023 increased from $238 billion at December 31, 2022, primarily due to issuances net of maturities and redemptions and mark-to-market adjustments on equity-linked borrowings driven by market factors. We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities. For further information on Borrowings, see Note 13 to the financial statements.", "prior_body": "$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $4,191 $4,191 Original maturities greater than one year2023$11,007 $7,903 $18,910 202419,618 10,224 29,842 202521,462 8,773 30,235 202623,622 5,376 28,998 202717,072 6,489 23,561 Thereafter76,855 25,466 102,321 Total$169,636 $64,231 $233,867 Total Borrowings$169,636 $68,422 $238,058 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. December 2022 Form 10-K44 December 2022 Form 10-K44 December 2022 Form 10-K44 44 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Borrowings of $238 billion as of December 31, 2022 were relatively unchanged when compared with $233 billion at December 31, 2021.We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.For further information on Borrowings, see Note 14 to the financial statements.Credit RatingsWe rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.”Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 17, 2023Parent CompanyShort-TermDebtLong-TermDebtRatingOutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1APositiveS&P Global RatingsA-2A-StableMSBNAShort-TermDebtLong-TermDebtRatingOutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-TermDebtLong-TermDebtRatingOutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableOn May 17, 2022, S&P Global Ratings upgraded the issuer ratings of the Parent Company from BBB+ to A-, and revised the Parent Company outlook from positive to stable.On November 4, 2022, Fitch Ratings, Inc. upgraded the issuer ratings of the Parent Company from A to A+, and MSBNA from A+ to AA-, and revised the Parent Company and MSBNA outlooks from positive to stable. Fitch Ratings, Inc. also upgraded the short-term rating of MSBNA from F1 to F1+.On December 16, 2022, Rating and Investment Information, Inc. revised the Parent Company outlook from stable to positive. Incremental Collateral or Terminating PaymentsIn connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 7 to the financial statements for additional information on OTC derivatives that contain such contingent features.While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests. Capital ManagementWe view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.Common Stock Repurchasesin millions, except for per share data202220212020Number of shares113 126 29 Average price per share$87.25 $91.13 $46.01 Total$9,865 $11,464 $1,347 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Borrowings of $238 billion as of December 31, 2022 were relatively unchanged when compared with $233 billion at December 31, 2021.We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.For further information on Borrowings, see Note 14 to the financial statements.Credit RatingsWe rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.”Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 17, 2023Parent CompanyShort-TermDebtLong-TermDebtRatingOutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1APositiveS&P Global RatingsA-2A-StableMSBNAShort-TermDebtLong-TermDebtRatingOutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-TermDebtLong-TermDebtRatingOutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+Stable Borrowings of $238 billion as of December 31, 2022 were relatively unchanged when compared with $233 billion at December 31, 2021. We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities. For further information on Borrowings, see Note 14 to the financial statements." }, { "status": "MODIFIED", "current_title": "Consolidated Results—Full Year Ended December 31, 2023", "prior_title": "Consolidated Results—Full Year ended December 31, 2022", "similarity_score": 0.567, "confidence": "low", "key_changes": [ "Reworded sentence: \"•The Firm reported net revenues of $54.1 billion and net income of $9.1 billion against a mixed market backdrop and a number of headwinds.\"" ], "current_body": "•The Firm reported net revenues of $54.1 billion and net income of $9.1 billion against a mixed market backdrop and a number of headwinds. •The Firm delivered ROE of 9.4% and ROTCE of 12.8% (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 77%. The ratio was negatively impacted by severance costs of $353 million, an FDIC special assessment of $286 million, higher legal expenses relating to a specific matter of $249 million and integration-related expenses of $293 million. •At December 31, 2023, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.2%. •Institutional Securities reported net revenues of $23.1 billion reflecting lower completed activity in Investment Banking and lower results in Equity and Fixed Income on reduced client activity and a less favorable market environment compared to a year ago. •Wealth Management delivered net revenues of $26.3 billion, reflecting mark-to-market gains on investments associated with certain employee deferred cash-based compensation plans (“DCP investments”) compared with losses in the prior year and higher Net interest revenues. The pre-tax margin was 24.9%. The business added net new assets of $282.3 billion, representing a 6.7% annualized growth rate from beginning period assets. •Investment Management reported net revenues of $5.4 billion and AUM increased to $1.5 trillion. Net Revenues($ in millions)Net Income Applicable to Morgan Stanley($ in millions)Earnings per Diluted Common Share2023 Compared with 2022 •We reported net revenues of $54.1 billion in 2023 compared with $53.7 billion in 2022. For 2023, net income applicable to Morgan Stanley was $9.1 billion, or $5.18 per diluted common share, compared with $11.0 billion, or $6.15 per diluted common share in 2022.", "prior_body": "•The Firm reported net revenues of $53.7 billion and net income of $11.0 billion as our businesses navigated a challenging market environment. •The Firm delivered ROTCE of 15.3%, or 15.7% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein). •The Firm expense efficiency ratio was 73%, or 72% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein). •At December 31, 2022, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.3%. •Institutional Securities reported net revenues of $24.4 billion reflecting lower activity in Investment Banking driven by the uncertain macroeconomic environment, partially offset by strong performance in Fixed Income. •Wealth Management delivered net revenues of $24.4 billion and a pre-tax margin of 27.0% or 28.4% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). The business added net new assets of $311 billion, representing a full year 6% annualized growth rate from beginning period assets. •Investment Management reported net revenues of $5.4 billion and AUM of $1.3 trillion in a challenging market environment." }, { "status": "MODIFIED", "current_title": "Holding large and concentrated positions may expose us to losses.", "prior_title": "Holding large and concentrated positions may expose us to losses.", "similarity_score": 0.566, "confidence": "low", "key_changes": [ "Reworded sentence: \"Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading) and lending businesses (including margin lending) in the event of unfavorable market movements.\"", "Reworded sentence: \"For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”\"" ], "current_body": "Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including block trading) and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country Risks.”", "prior_body": "Concentration of risk may reduce revenues or result in losses in our market-making, investing, underwriting (including 9December 2022 Form 10-K 9December 2022 Form 10-K 9December 2022 Form 10-K 9 Table of Contents Table of Contents Table of Contents block trading), and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks.”Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”We are exposed to the risk that third-parties that are indebted to us will not perform their obligations.We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearing houses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, and residential mortgage loans, including HELOCs.Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates, and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher than anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring; (ii) over-collateralization; (iii) ability to call for additional collateral; or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, industry or country. Although our models and estimates account for correlations among related types of exposures, a change in the market environment for a concentrated product or an external factor impacting a concentrated counterparty, industry or country may result in credit losses in excess of amounts forecast. In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.A default by a large financial institution could adversely affect financial markets.The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearing houses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearing houses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also “Systemic Risk Regime” under “Business—Supervision and Regulation—Financial Holding Company.”Operational RiskOperational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyber-attacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of block trading), and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks.”Credit RiskCredit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”We are exposed to the risk that third-parties that are indebted to us will not perform their obligations.We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; providing short- or long-term funding that is secured by physical or financial collateral whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearing houses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans.We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, and residential mortgage loans, including HELOCs.Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates, and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher than anticipated credit losses as a result of (i) disputes with counterparties over block trading), and lending businesses (including margin lending) in the event of unfavorable market movements. We commit substantial amounts of capital to these businesses, which often results in our taking large positions in the securities of, or making large loans to, a particular issuer or issuers in a particular industry, country or region. In the event we hold a concentrated position larger than those held by competitors, we may incur larger losses. For further information regarding our country risk exposure, see also “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks.”" }, { "status": "MODIFIED", "current_title": "Provision for Credit Losses by Business Segment", "prior_title": "Provision for Credit Losses by Business Segment", "similarity_score": 0.565, "confidence": "low", "key_changes": [ "Reworded sentence: \"Year Ended December 31, 2023$ in millionsISWMTotalLoans$356 $132 $488 Lending commitments45 (1)44 Total$401 $131 $532 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards.\"", "Reworded sentence: \"The allowance for credit losses for loans and lending commitments increased in 2023, primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios.\"", "Reworded sentence: \"gross domestic product (“GDP”).Forecasted U.S.\"" ], "current_body": "Year Ended December 31, 2023$ in millionsISWMTotalLoans$356 $132 $488 Lending commitments45 (1)44 Total$401 $131 $532 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered. The allowance for credit losses for loans and lending commitments increased in 2023, primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. Charge-offs in 2023 were primarily related to Commercial real estate and Corporate loans.The base scenario used in our ACL models as of December 31, 2023 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes slow economic growth in 2024, followed by a gradual improvement in 2025. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product (“GDP”).Forecasted U.S. Real GDP Growth Rates in Base Scenario4Q 20244Q 2025Year-over-year growth rate0.9 %2.0 %See Note 2 to the financial statements for a discussion of the Firm’s ACL methodology under CECL.Status of Loans Held for InvestmentAt December 31, 2023At December 31, 2022ISWMISWMAccrual98.9 %99.8 %99.3 %99.9 %Nonaccrual11.1 %0.2 %0.7 %0.1 %1.Nonaccrual loans are loans where principal or interest is not expected when contractually due or are past due 90 days or more.Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2023Net charge-off ratio10.47 %— %1.50 %— %— %0.08 %Average loans$7,062 $37,702 $8,590 $57,177 $91,126 $201,657 2022Net charge-off ratio1(0.09)%0.01 %0.09 %— %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %— %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 CRE—Commercial real estateSBL—Securities-based lending 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL. deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. Charge-offs in 2023 were primarily related to Commercial real estate and Corporate loans. The base scenario used in our ACL models as of December 31, 2023 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes slow economic growth in 2024, followed by a gradual improvement in 2025. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product (“GDP”).", "prior_body": "Year EndedDecember 31, 2022$ in millionsISWMTotalLoans$149 $67 $216 Lending commitments62 2 64 Total$211 $69 $280 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered. The aggregate allowance for credit losses for loans and lending commitments increased in 2022, reflecting the Provision for credit losses due to portfolio growth and deterioration in macroeconomic outlook. The base scenario used in our ACL models as of December 31, 2022 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes weak economic growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product." }, { "status": "MODIFIED", "current_title": "Unsecured Financing", "prior_title": "Unsecured Financing", "similarity_score": 0.563, "confidence": "low", "key_changes": [ "Reworded sentence: \"Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria.\"" ], "current_body": "We view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 6 and 13 to the financial statements). Deposits $ in millionsAtDecember 31,2023 AtDecember 31,2022 Savings and demand deposits:Brokerage sweep deposits1$148,274 $202,592 Savings and other139,978 117,356 Total Savings and demand deposits288,252 319,948 Time deposits63,552 36,698 Total2$351,804 $356,646 Brokerage sweep deposits1 Total2 1.Amounts represent balances swept from client brokerage accounts. 2.As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion of off-balance sheet amounts were excluded from deposits at unaffiliated financial institutions. Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics relative to other sources of funding. Each category of deposits presented above has a different cost profile and clients may respond differently to changes in interest rates and other macroeconomic conditions. The decrease in total deposits in 2023 was primarily driven by a continued reduction in Brokerage sweep deposits, largely due to net outflows to alternative cash equivalent and other products, partially offset by an increase in Time deposits and Savings. Borrowings by Remaining Maturity at December 31, 20231$ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$— $3,188 $3,188 Original maturities greater than one year2024$8,915 $11,236 $20,151 202522,030 13,493 35,523 202624,516 10,907 35,423 202719,282 6,056 25,338 202811,432 9,807 21,239 Thereafter90,635 32,235 122,870 Total greater than one year$176,810 $83,734 $260,544 Total$176,810 $86,922 $263,732 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date.Borrowings of $264 billion at December 31, 2023 increased from $238 billion at December 31, 2022, primarily due to issuances net of maturities and redemptions and mark-to-market adjustments on equity-linked borrowings driven by market factors.We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.For further information on Borrowings, see Note 13 to the financial statements.Credit RatingsWe rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.”", "prior_body": "We view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts which are not classified as OTC derivatives because they fail net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 7 and 14 to the financial statements). Deposits $ in millionsAtDecember 31,2022 AtDecember 31,2021 Savings and demand deposits:Brokerage sweep deposits1$202,592 $298,352 Savings and other117,356 34,395 Total Savings and demand deposits319,948 332,747 Time deposits36,698 14,827 Total2$356,646 $347,574 Brokerage sweep deposits1 Total2 1.Amounts represent balances swept from client brokerage accounts. 2.Excludes approximately $6 billion and $9 billion of off-balance sheet deposits at unaffiliated financial institutions as of December 31, 2022 and December 31, 2021, respectively. This client cash held by third parties is not reflected in our balance sheet and is not immediately available for liquidity purposes. Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics. The increase in total deposits in 2022 was primarily driven by higher Savings and other and Time deposits, partially offset by a reduction in Brokerage sweep deposits." }, { "status": "MODIFIED", "current_title": "Credit Ratings", "prior_title": "Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 17, 2023", "similarity_score": 0.554, "confidence": "low", "key_changes": [ "Reworded sentence: \"We rely on external sources to finance a significant portion of our daily operations.\"", "Reworded sentence: \"In the future, we may expand or contract our capital base to address the changing needs of our businesses.Common Stock Repurchasesin millions, except for per share data202320222021Number of shares62 113 126 Average price per share$85.35 $87.25 $91.13 Total$5,300 $9,865 $11,464 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 17 to the financial statements.For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.Common Stock Dividend AnnouncementAnnouncement dateJanuary 16, 2024Amount per share$0.85Date paidFebruary 15, 2024Shareholders of record as ofJanuary 31, 2024For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.For additional information on our common stock and information on our preferred stock, see Note 17 to the financial statements.Off-Balance Sheet Arrangements We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.We utilize SPEs primarily in connection with securitization activities.\"" ], "current_body": "We rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk.” December 2023 Form 10-K52 December 2023 Form 10-K52 December 2023 Form 10-K52 52 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 16, 2024Parent CompanyShort-Term DebtLong-Term DebtRating OutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1A+StableS&P Global RatingsA-2A-StableMSBNAShort-Term DebtLong-Term DebtRating OutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-Term DebtLong-Term DebtRating OutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableIncremental Collateral or Terminating PaymentsIn connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 6 to the financial statements for additional information on OTC derivatives that contain such contingent features.While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests. Capital ManagementWe view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.Common Stock Repurchasesin millions, except for per share data202320222021Number of shares62 113 126 Average price per share$85.35 $87.25 $91.13 Total$5,300 $9,865 $11,464 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 17 to the financial statements.For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.Common Stock Dividend AnnouncementAnnouncement dateJanuary 16, 2024Amount per share$0.85Date paidFebruary 15, 2024Shareholders of record as ofJanuary 31, 2024For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.For additional information on our common stock and information on our preferred stock, see Note 17 to the financial statements.Off-Balance Sheet Arrangements We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 15 to the financial statements.For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 14 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.Regulatory RequirementsRegulatory Capital FrameworkWe are an FHC under the BHC Act and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 16, 2024Parent CompanyShort-Term DebtLong-Term DebtRating OutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1A+StableS&P Global RatingsA-2A-StableMSBNAShort-Term DebtLong-Term DebtRating OutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-Term DebtLong-Term DebtRating OutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableIncremental Collateral or Terminating PaymentsIn connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 6 to the financial statements for additional information on OTC derivatives that contain such contingent features.While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests. Capital ManagementWe view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.", "prior_body": "Parent CompanyShort-TermDebtLong-TermDebtRatingOutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody’s Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1APositiveS&P Global RatingsA-2A-Stable MSBNAShort-TermDebtLong-TermDebtRatingOutlookFitch Ratings, Inc.F1+AA-StableMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-TermDebtLong-TermDebtRatingOutlookMoody’s Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+Stable On May 17, 2022, S&P Global Ratings upgraded the issuer ratings of the Parent Company from BBB+ to A-, and revised the Parent Company outlook from positive to stable.On November 4, 2022, Fitch Ratings, Inc. upgraded the issuer ratings of the Parent Company from A to A+, and MSBNA from A+ to AA-, and revised the Parent Company and MSBNA outlooks from positive to stable. Fitch Ratings, Inc. also upgraded the short-term rating of MSBNA from F1 to F1+.On December 16, 2022, Rating and Investment Information, Inc. revised the Parent Company outlook from stable to positive. Incremental Collateral or Terminating PaymentsIn connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 7 to the financial statements for additional information on OTC derivatives that contain such contingent features.While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests. Capital ManagementWe view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.Common Stock Repurchasesin millions, except for per share data202220212020Number of shares113 126 29 Average price per share$87.25 $91.13 $46.01 Total$9,865 $11,464 $1,347 For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress On May 17, 2022, S&P Global Ratings upgraded the issuer ratings of the Parent Company from BBB+ to A-, and revised the Parent Company outlook from positive to stable. On November 4, 2022, Fitch Ratings, Inc. upgraded the issuer ratings of the Parent Company from A to A+, and MSBNA from A+ to AA-, and revised the Parent Company and MSBNA outlooks from positive to stable. Fitch Ratings, Inc. also upgraded the short-term rating of MSBNA from F1 to F1+. On December 16, 2022, Rating and Investment Information, Inc. revised the Parent Company outlook from stable to positive." }, { "status": "MODIFIED", "current_title": "Liquidity Coverage Ratio", "prior_title": "Liquidity Coverage Ratio", "similarity_score": 0.541, "confidence": "low", "key_changes": [ "Reworded sentence: \"Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Eligible HQLA1 Cash deposits with central banks$58,047 $60,163 Securities2194,970 181,010 Total Eligible HQLA1$253,017 $241,173 Net cash outflows$196,488 $190,336 LCR129 %127 %\"" ], "current_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Eligible HQLA1 Cash deposits with central banks$58,047 $60,163 Securities2194,970 181,010 Total Eligible HQLA1$253,017 $241,173 Net cash outflows$196,488 $190,336 LCR129 %127 %", "prior_body": "Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2022September 30, 2022Eligible HQLA1 Cash deposits with central banks$52,765 $57,133 Securities2186,551 183,102 Total Eligible HQLA1$239,316 $240,235 LCR132 %136 %" }, { "status": "MODIFIED", "current_title": "Average AUM", "prior_title": "Average AUM", "similarity_score": 0.536, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in billions202320222021Equity$279 $298 $362 Fixed income170 186 181 Alternatives and Solutions466 435 380 Long-Term AUM Subtotal915 919 923 Liquidity and Overlay Services464 462 430 Total AUM$1,379 $1,381 $1,353 Long-Term AUM Subtotal\"" ], "current_body": "$ in billions202320222021Equity$279 $298 $362 Fixed income170 186 181 Alternatives and Solutions466 435 380 Long-Term AUM Subtotal915 919 923 Liquidity and Overlay Services464 462 430 Total AUM$1,379 $1,381 $1,353 Long-Term AUM Subtotal", "prior_body": "$ in billions202220212020Equity$298 $362 $174 Fixed income186 181 86 Alternatives and Solutions435 380 145 Long-term AUM subtotal919 923 405 Liquidity and Overlay Services462 430 252 Total AUM$1,381 $1,353 $657" }, { "status": "MODIFIED", "current_title": "Allowance for Credit Losses—Loans and Lending Commitments", "prior_title": "Allowance for Credit Losses—Loans and Lending Commitments", "similarity_score": 0.533, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in millions2023ACL—LoansBeginning balance$839 Gross charge-offs(167)Recoveries2 Net (charge-offs) recoveries(165)Provision for credit losses488 Other7 Ending balance$1,169 ACL—Lending commitmentsBeginning balance$504 Provision for credit losses44 Other3 Ending balance$551 Total ending balance$1,720\"" ], "current_body": "$ in millions2023ACL—LoansBeginning balance$839 Gross charge-offs(167)Recoveries2 Net (charge-offs) recoveries(165)Provision for credit losses488 Other7 Ending balance$1,169 ACL—Lending commitmentsBeginning balance$504 Provision for credit losses44 Other3 Ending balance$551 Total ending balance$1,720", "prior_body": "$ in millionsACL—Loans$654 ACL—Lending commitments444 Total at December 31, 20211,098 Gross charge-offs(31)Recoveries7 Net (charge-offs) recoveries(24)Provision for credit losses280 Other(11)Total at December 31, 2022$1,343 ACL—Loans$839 ACL—Lending commitments504" }, { "status": "MODIFIED", "current_title": "Other Net Revenues", "prior_title": "Other Net Revenues", "similarity_score": 0.529, "confidence": "low", "key_changes": [ "Reworded sentence: \"Other net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs.\"" ], "current_body": "Other net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs.", "prior_body": "Other net revenues reflected a loss of $633 million in 2022 compared to a gain in the prior year, primarily due to mark-to-market losses on corporate loans held for sale inclusive of hedges of $876 million in 2022 compared to $195 million in 2021, partially offset by higher net interest income and fees of $701 million in 2022 compared with $509 million in 2021. Also contributing to the decline were losses in 2022 compared with gains in 2021 on investments associated with certain employee deferred cash-based compensation plans and lower results from our Japanese joint venture, MUMSS." }, { "status": "MODIFIED", "current_title": "Projected Future Compensation Expense1", "prior_title": "Projected Future Compensation Expense1", "similarity_score": 0.527, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in millionsEstimated to be recognized in:2024$534 2025337 Thereafter859 Total$1,730 2024 1.Amounts relate to performance years 2023 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments.\"", "Reworded sentence: \"For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements.\"", "Reworded sentence: \"Accounting updates not listed below were assessed and determined to be either not applicable or to not have a material impact on our financial condition or results of operations upon adoption.We adopted the following accounting update on January 1, 2024, with no material impact on our financial condition or results of operations upon adoption:•Investments—Tax Credit Structures.\"" ], "current_body": "$ in millionsEstimated to be recognized in:2024$534 2025337 Thereafter859 Total$1,730 2024 1.Amounts relate to performance years 2023 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments. The previous table sets forth an estimate of compensation expense associated with the projected future compensation obligation. Our projected future compensation obligation and expense for DCP for performance years 2023 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information. For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 19 to the financial statements. Accounting Development UpdatesThe Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and determined to be either not applicable or to not have a material impact on our financial condition or results of operations upon adoption.We adopted the following accounting update on January 1, 2024, with no material impact on our financial condition or results of operations upon adoption:•Investments—Tax Credit Structures. This accounting update permits an election to account for tax equity investments using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and recognized net in the income statement as a component of provision for income taxes. The update requires a separate accounting policy election to be made for each tax credit program. Additional disclosures are required regarding (i) the nature of our tax equity investments and (ii) the effect of our tax equity investments and related income tax credits on the financial condition and results of operations. We are currently evaluating the following accounting updates; however, we do not expect a material impact on our financial condition or results of operations upon adoption:•Income Tax Disclosures. This accounting update requires disclosure of additional information in relation to income taxes, including additional disaggregation of the income tax rate reconciliation and income taxes paid. For the income tax rate reconciliation, this update requires (1) disclosure of specific categories of reconciling items; and (2) providing additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). For income taxes paid, this update requires disclosure of information, including (1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received), disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). Additionally, the update requires disclosure of (1) income (or loss) before income taxes, disaggregated between domestic and foreign; and (2) income taxes disaggregated by federal, state and foreign. The accounting update is effective for annual periods beginning January 1, 2025, with early adoption permitted.•Segment Reporting. This accounting update requires additional reportable segment disclosures on an annual and interim basis, primarily about significant segment expenses and other segment items that are regularly provided to the", "prior_body": "$ in millionsEstimated to be recognized in:2023$478 2024292 Thereafter710 Total$1,480 2023 1.Amounts relate to performance years 2022 and prior, and do not include assumptions regarding forfeitures or assumptions about future market conditions with respect to referenced investments. The previous table sets forth an estimate of compensation expense associated with the Projected Future Compensation Obligation. Our projected future compensation obligation and expense for deferred cash-based compensation for performance years 2022 and prior are forward-looking statements subject to uncertainty. Actual results may be materially affected by various factors, including, among other things: the performance of each participant’s referenced investments; changes in market conditions; participants’ allocation of their deferred awards; and participant cancellations or accelerations. See “Forward-Looking Statements” and “Risk Factors” for additional information. For further information on the Firm’s deferred stock-based plans and carried interest compensation, which are excluded from the previous tables, see Notes 2 and 20 to the financial statements. Accounting Development UpdatesThe Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and either determined to be not applicable or to not have a material impact on our financial condition or results of operations upon adoption.We adopted the following accounting updates on January 1, 2023:•Financial Instruments—Credit Losses. This accounting update eliminates the accounting guidance for Troubled Debt Restructurings (“TDRs”) and requires new disclosures regarding certain modifications of financing receivables (i.e., principal forgiveness, interest rate reductions, other-than-insignificant payment delays and term extensions) to borrowers experiencing financial difficulty. The update also requires disclosure of current period gross charge-offs by year of origination for financing receivables measured at amortized cost. We adopted this update on a prospective basis and noted no impact on our financial condition or results of operation upon adoption.We are currently evaluating the following accounting update, however, we do not expect a material impact on our financial condition or results of operations upon adoption:•Fair Value Measurement. This accounting update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The update also requires additional disclosures including the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction and circumstances that could cause the restriction to lapse. The ASU is effective January 1, 2024 with early adoption permitted.Critical Accounting EstimatesOur financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity.Fair ValueFinancial Instruments Measured at Fair ValueA significant number of our financial instruments are carried at fair value. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting estimate. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to:" }, { "status": "MODIFIED", "current_title": "Income Statement Information", "prior_title": "Income Statement Information", "similarity_score": 0.522, "confidence": "low", "key_changes": [ "Reworded sentence: \"% Change$ in millions20232022202120232022RevenuesAsset management$14,019 $13,872 $13,966 1 %(1)%Transactional13,556 2,473 4,259 44 %(42)%Net interest8,118 7,429 5,393 9 %38 %Other1575 643 625 (11)%3 %Net revenues26,268 24,417 24,243 8 %1 %Provision for credit losses131 69 11 90 %N/MCompensation and benefits13,972 12,534 13,090 11 %(4)%Non-compensation expenses5,635 5,231 4,961 8 %5 %Total non-interest expenses19,607 17,765 18,051 10 %(2)%Income before provision for income taxes6,530 6,583 6,181 (1)%7 %Provision for income taxes1,508 1,444 1,447 4 %— %Net income applicable to Morgan Stanley$5,022 $5,139 $4,734 (2)%9 % Transactional1 Other1 1.Transactional includes Investment banking, Trading, and Commissions and fees revenues.\"" ], "current_body": "% Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%", "prior_body": "% Change$ in millions20222021202020222021RevenuesAdvisory$2,946 $3,487 $2,008 (16)%74 %Equity851 4,437 3,092 (81)%43 %Fixed income1,438 2,348 2,104 (39)%12 %Total Underwriting2,289 6,785 5,196 (66)%31 %Total Investment banking5,235 10,272 7,204 (49)%43 %Equity10,769 11,435 9,921 (6)%15 %Fixed income9,022 7,516 8,847 20 %(15)%Other(633)610 504 N/M21 %Net revenues24,393 29,833 26,476 (18)%13 %Provision for credit losses211 (7)731 N/M(101)%Compensation and benefits8,246 9,165 8,342 (10)%10 %Non-compensation expenses9,221 8,861 8,252 4 %7 %Total non-interest expenses17,467 18,026 16,594 (3)%9 %Income before provision for income taxes6,715 11,814 9,151 (43)%29 %Provision for income taxes1,308 2,746 2,040 (52)%35 %Net income5,407 9,068 7,111 (40)%28 %Net income applicable to noncontrolling interests165 111 99 49 %12 %Net income applicable to Morgan Stanley$5,242 $8,957 $7,012 (41)%28 %" }, { "status": "MODIFIED", "current_title": "Non-Interest Expenses", "prior_title": "Non-interest Expenses", "similarity_score": 0.512, "confidence": "low", "key_changes": [ "Reworded sentence: \"Non-interest expenses of $4,528 million in 2023 decreased 1% from the prior year, primarily due to lower Compensation and benefits expenses.\"", "Reworded sentence: \"dollar dominated funds.\"", "Reworded sentence: \"The payment of those fees to the distributor is included in Non-compensation expenses in the income statement.Asset management and other related fees within the Investment Management segment are primarily generated from Equity, Fixed Income and the following products:Alternatives and Solutions.\"" ], "current_body": "($ in millions) •Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”) and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation. 2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023. •Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter.", "prior_body": "Non-interest expenses of $17,467 million in 2022 decreased 3% compared with the prior year due to lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses. •Compensation and benefits expenses decreased in the current year primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price, and lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses.•Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology.Income Tax ItemsThe effective tax rate of 19.5% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. lower expenses related to certain deferred cash-based compensation plans linked to investment performance, partially offset by higher salary expenses. •Non-compensation expenses increased in the current year primarily due to an increase in legal expenses, including $200 million related to a regulatory matter in the second quarter of 2022 and an increased spend on technology." }, { "status": "MODIFIED", "current_title": "Provision for Credit Losses", "prior_title": "Income Taxes", "similarity_score": 0.499, "confidence": "low", "key_changes": [ "Reworded sentence: \"The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios.\"" ], "current_body": "The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see “Credit Risk” herein. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses.•Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues.•Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues.", "prior_body": "The Firm's effective tax rate of 20.7% for 2022 was lower compared with the prior year, primarily driven by the realization of certain tax benefits. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 23 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $24,393 million in 2022 decreased 18% from the prior year, primarily reflecting lower results from Investment banking, particularly equity underwriting, and losses in Other net revenues primarily from higher mark-to-market losses on corporate loans held for sale inclusive of hedges, partially offset by higher Fixed income results, particularly in global macro products.•Wealth Management net revenues of $24,417 million in 2022 increased 1% from the prior year, as higher Net interest revenues were offset by lower Transactional revenues, primarily driven by losses on investments associated with certain employee deferred cash-based compensation plans." }, { "status": "MODIFIED", "current_title": "Non-GAAP Financial Measures by Business Segment", "prior_title": "Non-GAAP Financial Measures by Business Segment", "similarity_score": 0.473, "confidence": "low", "key_changes": [ "Reworded sentence: \"$ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %\"" ], "current_body": "$ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %", "prior_body": "$ in billions202220212020Average common equity4Institutional Securities$48.8 $43.5 $42.8 Wealth Management31.0 28.6 20.8 Investment Management10.6 8.8 2.6 ROE5Institutional Securities10 %20 %15 %Wealth Management16 %16 %16 %Investment Management6 %15 %23 %Average tangible common equity4Institutional Securities$48.3 $42.9 $42.3 Wealth Management16.3 13.4 11.3 Investment Management0.8 0.9 1.7 ROTCE5Institutional Securities10 %20 %16 %Wealth Management31 %34 %29 %Investment Management86 %144 %36 %" }, { "status": "MODIFIED", "current_title": "Institutional Securities Loans and Lending Commitments Held for Investment", "prior_title": "Institutional Securities Loans and Lending Commitments Held for Investment", "similarity_score": 0.47, "confidence": "low", "key_changes": [ "Reworded sentence: \"At December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158) Institutional Securities Commercial Real Estate Loans and Lending CommitmentsBy RegionAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalAmericas$5,410 $289 $5,699 $6,320 $378 $6,698 EMEA3,127 56 3,183 3,040 79 3,119 Asia485 — 485 445 5 450 Total$9,022 $345 $9,367 $9,805 $462 $10,267 By Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 — 2 55 — 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 LC–Lending Commitments1.\"" ], "current_body": "At December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158) Institutional Securities Commercial Real Estate Loans and Lending CommitmentsBy RegionAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalAmericas$5,410 $289 $5,699 $6,320 $378 $6,698 EMEA3,127 56 3,183 3,040 79 3,119 Asia485 — 485 445 5 450 Total$9,022 $345 $9,367 $9,805 $462 $10,267 By Property TypeAt December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 — 2 55 — 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 LC–Lending Commitments1. Amounts include HFI, HFS and FVO loans and lending commitments. HFI loans are presented net of ACL.The current economic environment and changes in business and consumer behavior have adversely impacted commercial real estate borrowers due to pressure from higher interest rates, tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. While we continue to actively monitor all our loan portfolios, the commercial real estate sector remains under heightened focus given the sector’s sensitivity to economic and secular factors, credit conditions, and difficulties specific to certain property types, most notably office.As of December 31, 2023 and December 31, 2022, our lending against commercial real estate (“CRE”) properties totaled $9.4 billion and $10.3 billion within the Institutional Securities business segment, which represents 4.5% and 5.3% of total exposure reflected in the Institutional Securities Loans and Lending Commitments table above. Those CRE loans are originated for experienced sponsors and are generally secured by specific institutional CRE properties. In many cases, loans are subsequently syndicated or securitized on a full or partial basis, reducing our ongoing exposure.In addition to the amounts included in the table above, we provide certain secured lending facilities which are typically collateralized by pooled CRE mortgage loans and are included in Secured lending facilities in the Institutional Securities Loans and Lending Commitments Held for Investment table above. These secured lending facilities benefit from structural protections including cross-collateralization and diversification across property types.", "prior_body": "At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158)At December 31, 2021$ in millionsLoansLending CommitmentsTotalCorporate$5,567 $73,585 $79,152 Secured lending facilities31,471 10,003 41,474 Commercial real estate7,227 1,475 8,702 Other1,292 887 2,179 Total, before ACL$45,557 $85,950 $131,507 ACL$(543)$(426)$(969)" }, { "status": "MODIFIED", "current_title": "Income Statement Information", "prior_title": "Income Statement Information", "similarity_score": 0.462, "confidence": "low", "key_changes": [ "Reworded sentence: \"% Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%\"" ], "current_body": "% Change$ in millions20232022202120232022RevenuesAdvisory$2,244 $2,946 $3,487 (24)%(16)%Equity889 851 4,437 4 %(81)%Fixed income1,445 1,438 2,348 — %(39)%Total Underwriting2,334 2,289 6,785 2 %(66)%Total Investment banking4,578 5,235 10,272 (13)%(49)%Equity9,986 10,769 11,435 (7)%(6)%Fixed income7,673 9,022 7,516 (15)%20 %Other823 (633)610 N/MN/MNet revenues23,060 24,393 29,833 (5)%(18)%Provision for credit losses401 211 (7)90 %N/MCompensation and benefits8,369 8,246 9,165 1 %(10)%Non-compensation expenses9,814 9,221 8,861 6 %4 %Total non-interest expenses18,183 17,467 18,026 4 %(3)%Income before provision for income taxes4,476 6,715 11,814 (33)%(43)%Provision for income taxes884 1,308 2,746 (32)%(52)%Net income3,592 5,407 9,068 (34)%(40)%Net income applicable to noncontrolling interests139 165 111 (16)%49 %Net income applicable to Morgan Stanley$3,453 $5,242 $8,957 (34)%(41)%", "prior_body": "% Change$ in millions20222021202020222021RevenuesAdvisory$2,946 $3,487 $2,008 (16)%74 %Equity851 4,437 3,092 (81)%43 %Fixed income1,438 2,348 2,104 (39)%12 %Total Underwriting2,289 6,785 5,196 (66)%31 %Total Investment banking5,235 10,272 7,204 (49)%43 %Equity10,769 11,435 9,921 (6)%15 %Fixed income9,022 7,516 8,847 20 %(15)%Other(633)610 504 N/M21 %Net revenues24,393 29,833 26,476 (18)%13 %Provision for credit losses211 (7)731 N/M(101)%Compensation and benefits8,246 9,165 8,342 (10)%10 %Non-compensation expenses9,221 8,861 8,252 4 %7 %Total non-interest expenses17,467 18,026 16,594 (3)%9 %Income before provision for income taxes6,715 11,814 9,151 (43)%29 %Provision for income taxes1,308 2,746 2,040 (52)%35 %Net income5,407 9,068 7,111 (40)%28 %Net income applicable to noncontrolling interests165 111 99 49 %12 %Net income applicable to Morgan Stanley$5,242 $8,957 $7,012 (41)%28 %" }, { "status": "MODIFIED", "current_title": "Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate Benchmarks", "prior_title": "Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate Benchmarks", "similarity_score": 0.461, "confidence": "low", "key_changes": [ "Reworded sentence: \"With the cessation of publication of U.S.\"" ], "current_body": "Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). With the cessation of publication of U.S. dollar LIBOR rates on a representative basis as of June 30, 2023, all LIBOR publications have ceased on a representative basis. However, the one-, three- and six-month U.S. dollar LIBOR and three-month sterling LIBOR rates are being published for a limited period for use in legacy transactions on the basis of a December 2023 Form 10-K58 December 2023 Form 10-K58 December 2023 Form 10-K58 58 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents synthetic methodology (known as “synthetic LIBOR”). Publication of the three-month synthetic sterling LIBOR will cease at the end of March 2024 and publication of the one-, three- and six-month synthetic U.S. dollar LIBOR will cease at the end of September 2024.As of December 31, 2023, a significant majority of our U.S. dollar LIBOR-referenced contracts contained fallback provisions or otherwise had a path that allowed for the transition to an alternative reference rate following the cessation of the applicable U.S. dollar LIBOR rate. We continue to execute against our Firmwide IBOR transition plan to complete the transition in all relevant markets to alternative reference rates.See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of other interest rate benchmarks and related risks.FDIC Final Rulemaking on Special AssessmentFollowing the failures of certain banks and resulting losses to the FDIC’s Deposit Insurance Fund in the first half of 2023, the FDIC adopted a final rule on November 16, 2023 to implement a special assessment to recover the cost associated with protecting uninsured depositors. Under the final rule, the assessment base for the special assessment is equal to an IDI’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The $5 billion exclusion is applied once to the aggregate uninsured deposits of our U.S. Bank Subsidiaries. The final rule provides that, starting in 2024, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points over eight quarterly assessment periods, subject to change depending on any adjustments to the loss estimate, mergers, failures, or amendments to reported estimates of uninsured deposits. We recorded the cost of the entire special assessment of $286 million in Non-interest expenses when the final rule was published in the Federal Register, in the fourth quarter of 2023.Basel III Endgame ProposalOn July 27, 2023, U.S. banking agencies proposed revisions to risk-based capital and related standards applicable to us and our U.S. Bank Subsidiaries (“Basel III Endgame Proposal”). The proposal would introduce a new measure of RWAs known as “Expanded Total RWAs” (the “Expanded Approach”), reflecting new RWA methodologies that generally align with changes to the global Basel Accord adopted by the Basel Committee. The proposal would eliminate the current capital rule’s Advanced Approach and effectively replace it with the Expanded Approach, which more heavily relies on standardized methodologies. As compared with the Standardized Approach, the Expanded Approach includes more granular risk weights for credit risk and introduces a new market risk framework. In addition, unlike the Standardized Approach, the Expanded Approach includes operational risk and credit valuation adjustment RWA components. The Basel III Endgame Proposal, if adopted as a final rule, would maintain the current capital rule’s dual-requirement structure, whereby we and our U.S. Bank Subsidiaries would be required to calculate our risk-based capital ratios under both the Expanded Approach and the Standardized Approach. In addition, the proposal would modify the Standardized Approach by requiring that the new market risk standards from the proposal also be applied in the Standardized Approach. The Basel III Endgame Proposal would apply the SCB and G-SIB surcharge to risk-based capital requirements calculated under both the Expanded Approach and the Standardized Approach. The proposal includes a proposed effective date of July 1, 2025, with three-year transition arrangements until revised standards are fully phased in on July 1, 2028.Based on our current understanding of the Basel III Endgame Proposal, we estimate that, if the Expanded Approach had applied on a fully phased-in basis as of December 31, 2023, and in the absence of taking any actions to mitigate its impact, our Expanded Approach RWAs as of that date would have been approximately 40% higher than our actual Standardized Approach RWAs as of that date.The increase in RWAs resulting from the Expanded Approach would result, assuming all other surcharge elements remained unchanged, in a lower SCB and lower G-SIB Method 2 surcharge as compared with current surcharges, as RWAs are included in the denominators of the relevant calculations for each buffer. Lower surcharges would, therefore, partially decrease the otherwise higher regulatory capital requirements under the Expanded Approach. The proposal would phase in the higher Expanded Approach RWAs on July 1 of each year during the transition, thereby increasing our regulatory capital requirements, with delayed incorporation of the potentially lower SCB and G-SIB Method 2 capital surcharge calculations.Any estimate of how the Expanded Approach may impact us is a forward-looking statement and subject to uncertainty, as actual results may differ from the anticipated results and may be materially affected by and dependent on a range of factors, including business performance, future capital actions, the results of future supervisory stress tests, and potential modifications to the proposal by the U.S. banking agencies in a final rulemaking. The Firm does not undertake to update any forward-looking statement.G-SIB Surcharge ProposalOn July 27, 2023, the Federal Reserve proposed revisions to the G-SIB capital surcharge framework applicable to us (“G-SIB Surcharge Proposal”). The G-SIB Surcharge Proposal includes various technical revisions to the G-SIB capital surcharge methodology and would revise the resulting synthetic methodology (known as “synthetic LIBOR”). Publication of the three-month synthetic sterling LIBOR will cease at the end of March 2024 and publication of the one-, three- and six-month synthetic U.S. dollar LIBOR will cease at the end of September 2024.As of December 31, 2023, a significant majority of our U.S. dollar LIBOR-referenced contracts contained fallback provisions or otherwise had a path that allowed for the transition to an alternative reference rate following the cessation of the applicable U.S. dollar LIBOR rate. We continue to execute against our Firmwide IBOR transition plan to complete the transition in all relevant markets to alternative reference rates.See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of other interest rate benchmarks and related risks.FDIC Final Rulemaking on Special AssessmentFollowing the failures of certain banks and resulting losses to the FDIC’s Deposit Insurance Fund in the first half of 2023, the FDIC adopted a final rule on November 16, 2023 to implement a special assessment to recover the cost associated with protecting uninsured depositors. Under the final rule, the assessment base for the special assessment is equal to an IDI’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The $5 billion exclusion is applied once to the aggregate uninsured deposits of our U.S. Bank Subsidiaries. The final rule provides that, starting in 2024, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points over eight quarterly assessment periods, subject to change depending on any adjustments to the loss estimate, mergers, failures, or amendments to reported estimates of uninsured deposits. We recorded the cost of the entire special assessment of $286 million in Non-interest expenses when the final rule was published in the Federal Register, in the fourth quarter of 2023.Basel III Endgame ProposalOn July 27, 2023, U.S. banking agencies proposed revisions to risk-based capital and related standards applicable to us and our U.S. Bank Subsidiaries (“Basel III Endgame Proposal”). The proposal would introduce a new measure of RWAs known as “Expanded Total RWAs” (the “Expanded Approach”), reflecting new RWA methodologies that generally align with changes to the global Basel Accord adopted by the Basel Committee. The proposal would eliminate the current capital rule’s Advanced Approach and effectively replace it with the Expanded Approach, which more heavily relies on standardized methodologies. As compared with the Standardized Approach, the Expanded Approach includes more granular risk weights for credit risk and introduces a new market risk framework. In addition, unlike the Standardized Approach, the Expanded Approach synthetic methodology (known as “synthetic LIBOR”). Publication of the three-month synthetic sterling LIBOR will cease at the end of March 2024 and publication of the one-, three- and six-month synthetic U.S. dollar LIBOR will cease at the end of September 2024. As of December 31, 2023, a significant majority of our U.S. dollar LIBOR-referenced contracts contained fallback provisions or otherwise had a path that allowed for the transition to an alternative reference rate following the cessation of the applicable U.S. dollar LIBOR rate. We continue to execute against our Firmwide IBOR transition plan to complete the transition in all relevant markets to alternative reference rates. See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of other interest rate benchmarks and related risks.", "prior_body": "Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and is a multi-year initiative. The publication of most non-U.S. dollar LIBOR rates ceased as of the end of December 2021, although certain Sterling and Yen LIBOR rates have been published for a limited period following this date on the basis of a “synthetic” methodology (known as “synthetic LIBOR”). The synthetic Yen LIBOR rates ceased as of the end of December 2022 and the U.K. Financial Conduct Authority (“UK FCA”), which regulates the publisher of LIBOR (ICE Benchmark Administration), has announced that publication of the one- and six-month tenors of synthetic Sterling LIBOR will cease at the end of March 2023 and the three-month synthetic Sterling LIBOR at the end of March 2024. U.S. dollar LIBOR rates are expected to cease being published as of the end of June 2023. On March 15, 2022 the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain U.S. law-governed contracts under certain circumstances with a SOFR-based rate identified in a Federal Reserve rule plus a statutory spread adjustment. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of any state or local law, statute, rule, regulation or standard. In addition, the UK FCA is considering the continued publication of the one-, three- and six-month tenors of U.S. dollar LIBOR on a synthetic basis until the end of September 2024. This may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation to remain on synthetic U.S. dollar LIBOR until the end of this period. As of December 31, 2022, our LIBOR-referenced contracts were primarily concentrated in derivative contracts and, to a lesser extent, loans, floating rate notes, preferred shares, securitizations and mortgages. A significant majority of our derivative contracts, and a majority of our non-derivative contracts, contain fallback provisions or otherwise have an expected path that will allow for the transition to an alternative reference rate upon the cessation of the applicable LIBOR rate. While we have made substantial progress in the transition away from the IBORs, we nonetheless currently remain party to a significant number of U.S. dollar LIBOR-linked 51December 2022 Form 10-K 51December 2022 Form 10-K 51December 2022 Form 10-K 51 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents contracts. For the limited number of U.S. dollar LIBOR-linked contracts without a current market standard fallback, or to which the federal legislation does not apply, we are actively developing appropriate transition plans in light of the planned June 30, 2023 cessation date for the remaining U.S. dollar LIBOR tenors.Our IBOR transition plan is overseen by a global steering committee, with senior management oversight, and we continue to execute against our Firm-wide IBOR transition plan to complete the transition to alternative reference rates.See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of interest rate benchmarks. contracts. For the limited number of U.S. dollar LIBOR-linked contracts without a current market standard fallback, or to which the federal legislation does not apply, we are actively developing appropriate transition plans in light of the planned June 30, 2023 cessation date for the remaining U.S. dollar LIBOR tenors.Our IBOR transition plan is overseen by a global steering committee, with senior management oversight, and we continue to execute against our Firm-wide IBOR transition plan to complete the transition to alternative reference rates.See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of interest rate benchmarks. contracts. For the limited number of U.S. dollar LIBOR-linked contracts without a current market standard fallback, or to which the federal legislation does not apply, we are actively developing appropriate transition plans in light of the planned June 30, 2023 cessation date for the remaining U.S. dollar LIBOR tenors. Our IBOR transition plan is overseen by a global steering committee, with senior management oversight, and we continue to execute against our Firm-wide IBOR transition plan to complete the transition to alternative reference rates. See also “Risk Factors—Risk Management” for a further discussion of risks related to the planned replacement of the IBORs and/or reform of interest rate benchmarks. December 2022 Form 10-K52 December 2022 Form 10-K52 December 2022 Form 10-K52 52 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments", "prior_title": "Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments", "similarity_score": 0.46, "confidence": "low", "key_changes": [ "Reworded sentence: \"Year Ended December 31, 2023$ in millionsCorporate Secured Lending FacilitiesCREOtherTotalACL—LoansBeginning balance$235 $153 $275 $11 $674 Gross charge-offs(34)— (129)(1)(164)Recoveries1 — — — 1 Net (charge-offs) recoveries(33)— (129)(1)(163)Provision (release)37 — 314 5 356 Other2 — 3 2 7 Ending balance$241 $153 $463 $17 $874 ACL—Lending commitmentsBeginning balance$411 $51 $15 $7 $484 Provision (release)16 18 11 — 45 Other4 1 — (1)4 Ending balance$431 $70 $26 $6 $533 Total ending balance$672 $223 $489 $23 $1,407\"" ], "current_body": "Year Ended December 31, 2023$ in millionsCorporate Secured Lending FacilitiesCREOtherTotalACL—LoansBeginning balance$235 $153 $275 $11 $674 Gross charge-offs(34)— (129)(1)(164)Recoveries1 — — — 1 Net (charge-offs) recoveries(33)— (129)(1)(163)Provision (release)37 — 314 5 356 Other2 — 3 2 7 Ending balance$241 $153 $463 $17 $874 ACL—Lending commitmentsBeginning balance$411 $51 $15 $7 $484 Provision (release)16 18 11 — 45 Other4 1 — (1)4 Ending balance$431 $70 $26 $6 $533 Total ending balance$672 $223 $489 $23 $1,407", "prior_body": "$ in millionsCorporate Secured Lending FacilitiesCommercial Real EstateOtherTotalACL—Loans$165 $163 $206 $9 $543 ACL—Lending commitments356 41 20 9 426 Total at December 31, 2021521 204 226 18 969 Gross charge-offs— (3)(7)(7)(17)Recoveries6 — — — 6 Net (charge-offs) recoveries6 (3)(7)(7)(11)Provision for credit losses124 4 75 8 211 Other(5)(1)(4)(1)(11)Total at December 31, 2022$646 $204 $290 $18 $1,158 ACL—Loans$235 $153 $275 $11 $674 ACL—Lending commitments411 51 15 7 484 Total at December 31, 2021" }, { "status": "MODIFIED", "current_title": "Morgan Stanley", "prior_title": "Acquisition of Eaton Vance", "similarity_score": 0.454, "confidence": "low", "key_changes": [ "Reworded sentence: \"1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues.\"" ], "current_body": "1.Includes Investments, Trading, Commissions and fees, Net interest and Other revenues. Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows.Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. The market environment and client preferences in recent quarters have impacted the mix of our average Long-Term AUM level across certain asset classes. To the extent these conditions continue, we would expect our Asset management revenue to continue to be negatively impacted.See “Assets Under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues increased to $139 million in 2023, from $43 million in the prior year, primarily due to mark-to-market gains in 2023 compared with losses in the prior year on DCP investments and investments in public funds, partially offset by lower accrued carried interest in certain private funds. Non-Interest ExpensesNon-interest expenses of $4,528 million in 2023 decreased 1% from the prior year, primarily due to lower Compensation and benefits expenses. •Compensation and benefits expenses decreased primarily due to lower expenses related to compensation associated with carried interest, partially offset by higher expenses related to DCP.•Non-compensation expenses were relatively unchanged for the current year.", "prior_body": "The comparisons of current year results to prior periods are impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements. Net RevenuesAsset Management and Related FeesAsset management and related fees of $5,332 million in 2022 decreased 4% compared with the prior year, reflecting the impact of the decline in the equity markets, partially offset by incremental revenues as a result of the Eaton Vance acquisition and the impact of lower fee waivers in certain money market funds. Asset management revenues are influenced by the level and relative mix of AUM and related fee rates. The current market environment may impact AUM and net flows within asset classes and therefore our asset management revenues.See “Assets under Management or Supervision” herein.Performance-based Income and OtherPerformance-based income and other revenues were $43 million in 2022, representing a 93% decrease from the prior year, primarily due to lower accrued carried interest in certain private equity and real estate funds, losses on investments associated with certain employee deferred cash-based compensation plans, and mark-to-market losses on public investments. Non-interest ExpensesNon-interest expenses of $4,568 million in 2022 were relatively unchanged from the prior year period, reflecting higher Non-compensation expenses offset by lower Compensation and benefits.•Compensation and benefits expenses decreased primarily due to lower discretionary incentive compensation driven by lower asset management revenues and lower compensation associated with carried interest, partially offset by the impact of incremental compensation as a result of the Eaton Vance acquisition.•Non-compensation expenses increased primarily due to higher marketing and business development costs and incremental expenses as a result of the Eaton Vance acquisition." }, { "status": "UNCHANGED", "current_title": "Incremental Collateral or Terminating Payments", "prior_title": "Incremental Collateral or Terminating Payments", "current_body": "In connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 6 to the financial statements for additional information on OTC derivatives that contain such contingent features. While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests." }, { "status": "UNCHANGED", "current_title": "Risk Limits Framework", "prior_title": "Risk Limits Framework", "current_body": "Risk limits and quantitative metrics provide the basis for monitoring risk-taking activity and avoiding outsized risk taking. Our risk-taking capacity is sized through the Firm’s capital planning process where losses are estimated under the Firm’s BHC Severely Adverse stress testing scenario. We also maintain a comprehensive suite of risk limits and quantitative metrics to support and implement our risk-appetite statement. Our risk limits support linkages between the overall risk appetite, which is reviewed by the Board, and more granular risk-taking decisions and activities. Risk limits, once established, are reviewed and updated on at least an annual basis, with more frequent updates as necessary. Board-level risk limits address the most important Firmwide aggregations of risk. Additional risk limits approved by the FRC address more specific types of risk and are bound by the higher-level Board risk limits." }, { "status": "UNCHANGED", "current_title": "Total Eligible HQLA1", "prior_title": "Total Eligible HQLA1", "current_body": "1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries. 2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds." }, { "status": "UNCHANGED", "current_title": "Balance Sheet", "prior_title": "Balance Sheet", "current_body": "We monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments. We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage." }, { "status": "UNCHANGED", "current_title": "Critical Accounting Estimates", "prior_title": "Critical Accounting Estimates", "current_body": "Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements), the following policies involve a higher degree of judgment and complexity. Fair Value" }, { "status": "UNCHANGED", "current_title": "Provision for Credit Losses", "prior_title": "Provision for Credit Losses", "current_body": "The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see “Credit Risk” herein. Business Segment ResultsNet Revenues by Segment1($ in millions)Net Income Applicable to Morgan Stanley by Segment1($ in millions)1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. •Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses.•Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues.•Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues." }, { "status": "UNCHANGED", "current_title": "Risk Factors", "prior_title": "Risk Factors", "current_body": "For a discussion of the risks and uncertainties that may affect our future results and strategic objectives, see “Forward-Looking Statements” preceding “Business” and “Return on Tangible Common Equity Goal” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”" }, { "status": "UNCHANGED", "current_title": "Asset Management Revenue Sensitivity", "prior_title": "Asset Management Revenue Sensitivity", "current_body": "Certain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets." }, { "status": "UNCHANGED", "current_title": "Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.", "prior_title": "Our liquidity and financial condition have in the past been, and in the future could be, adversely affected by U.S. and international markets and economic conditions.", "current_body": "Our ability to raise funding in the long-term or short-term debt capital markets or the equity markets, or to access secured lending markets, has in the past been, and could in the future be, adversely affected by conditions in the U.S. and international markets and economies. In particular, our cost and availability of funding in the past have been, and may in the future be, adversely affected by illiquid credit markets, interest rates and wider credit spreads. Significant turbulence in the U.S., the E.U. and other international markets and economies could adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us." }, { "status": "UNCHANGED", "current_title": "Credit Risk", "prior_title": "Credit Risk", "current_body": "Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”" }, { "status": "UNCHANGED", "current_title": "Independent Risk Management Functions", "prior_title": "Independent Risk Management Functions", "current_body": "The Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management Departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk Departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under “Market Risk,” “Credit Risk,” “Operational Risk,” “Model Risk” and “Liquidity Risk” and “Legal, Regulatory and Compliance Risk” herein." }, { "status": "UNCHANGED", "current_title": "We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.", "prior_title": "We may be responsible for representations and warranties associated with commercial and residential real estate loans and may incur losses in excess of our reserves.", "current_body": "We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 14 to the financial statements." }, { "status": "UNCHANGED", "current_title": "Morgan Stanley Board of Directors", "prior_title": "Morgan Stanley Board of Directors", "current_body": "The Board has oversight of the ERM framework and is responsible for helping to ensure that our risks are managed in a sound manner. The Board has authorized the committees within the ERM framework to help facilitate our risk oversight responsibilities. As set forth in the Board’s Corporate Governance Policies, the Board also oversees, and receives reports on, our financial performance, strategy and business plans, as well as our practices and procedures relating to reputational and franchise risk, and culture, values and conduct." }, { "status": "UNCHANGED", "current_title": "Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.", "prior_title": "Automated trading markets and the introduction and application of new technologies may adversely affect our business and may increase competition.", "current_body": "We continue to experience price competition in some of our businesses. In particular, the ability to execute securities, derivatives and other financial instrument trades electronically on exchanges, swap execution facilities and other automated trading platforms, and the introduction and application of new technologies, including generative artificial intelligence, will likely continue the pressure on revenues. The trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future." }, { "status": "UNCHANGED", "current_title": "Commissions and Fees", "prior_title": "Commissions and Fees", "current_body": "Commissions and fees result from arrangements in which the client is charged a fee for executing transactions related to securities, services related to sales and trading activities, and sales of other products. Within the Institutional Securities business segment, commissions and fees include fees earned from market-making activities, such as executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC derivatives. Within the Wealth Management business segment, commissions and fees arise from client transactions primarily in equity securities, insurance products, mutual funds, alternative investments, futures and options. Wealth Management also earns revenues from order flow payments for directing customer orders to broker-dealers, exchanges and market centers for execution." }, { "status": "UNCHANGED", "current_title": "Attribution of Average Common Equity According to the Required Capital Framework", "prior_title": "Attribution of Average Common Equity According to the Required Capital Framework", "current_body": "Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital. The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent Company common equity. We generally hold Parent Company common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs." }, { "status": "UNCHANGED", "current_title": "Off-Balance Sheet Arrangements", "prior_title": "Off-Balance Sheet Arrangements", "current_body": "We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments. We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 15 to the financial statements. For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 14 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein." }, { "status": "UNCHANGED", "current_title": "Risk Management", "prior_title": "Risk Management", "current_body": "Overview Risk is an inherent part of our businesses and activities. We believe effective risk management is vital to the success of our business activities. Accordingly, we have an ERM framework to integrate the diverse roles of risk management into a holistic enterprise structure and to facilitate the incorporation of risk assessment into decision-making processes across the Firm. We have policies and procedures in place to identify, measure, monitor, escalate, mitigate and control the principal risks involved in the activities of the Institutional Securities, Wealth Management and Investment Management business segments, as well as at the Parent Company level. The principal risks involved in our business activities are both financial and non-financial and include market (including non-trading risks), credit, liquidity, model, operational (including cybersecurity), compliance (including conduct), financial crime, strategic and reputational risks. Strategic risk is integrated into our business planning, embedded in the evaluation of all principal risks and overseen by the Board. The cornerstone of our risk management philosophy is the pursuit of risk-adjusted returns through prudent risk taking that protects our capital base and franchise. This philosophy is implemented through the ERM framework. Five key principles underlie this philosophy: integrity, comprehensiveness, independence, accountability and transparency. To help ensure the efficacy of risk management, which is an essential component of our reputation, senior management requires thorough and frequent reporting and the appropriate escalation of risk matters. The fast-paced, complex and constantly evolving nature of global financial markets requires us to maintain a risk management culture that is incisive, knowledgeable about specialized products and markets, and subject to ongoing review and enhancement.Our risk appetite defines the aggregate level and types of risk that the Firm is willing to accept to achieve its business objectives, taking into account the interests of clients and fiduciary duties to shareholders, as well as capital and other regulatory requirements. This risk appetite is embedded in our risk culture and linked to our short-term and long-term strategic, capital and financial plans, as well as compensation programs. This risk appetite and the related Board-level risk limits and risk tolerance statements are reviewed and approved by the BRC and the Board on at least an annual basis.Risk Governance StructureRisk management at the Firm requires independent Firm-level oversight, accountability of our business divisions, and effective communication of risk matters across the Firm, to senior management and ultimately to the Board. Our risk governance structure is set forth in the following chart and also includes risk managers, committees, and groups within and across business segments and operating legal entities. The ERM framework, composed of independent but complementary entities, facilitates efficient and comprehensive supervision of our risk exposures and processes. management requires thorough and frequent reporting and the appropriate escalation of risk matters. The fast-paced, complex and constantly evolving nature of global financial markets requires us to maintain a risk management culture that is incisive, knowledgeable about specialized products and markets, and subject to ongoing review and enhancement. Our risk appetite defines the aggregate level and types of risk that the Firm is willing to accept to achieve its business objectives, taking into account the interests of clients and fiduciary duties to shareholders, as well as capital and other regulatory requirements. This risk appetite is embedded in our risk culture and linked to our short-term and long-term strategic, capital and financial plans, as well as compensation programs. This risk appetite and the related Board-level risk limits and risk tolerance statements are reviewed and approved by the BRC and the Board on at least an annual basis." }, { "status": "UNCHANGED", "current_title": "Liquidity Risk Management Framework", "prior_title": "Liquidity Risk Management Framework", "current_body": "The primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies. The following principles guide our Liquidity Risk Management Framework: •Sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”) should be maintained to cover maturing liabilities and other planned and contingent outflows; •Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding; •Source, counterparty, currency, region and term of funding should be diversified; and •Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding. The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile." }, { "status": "UNCHANGED", "current_title": "Firm Risk Committee", "prior_title": "Firm Risk Committee", "current_body": "The Board has also authorized the Firm Risk Committee (“FRC”), a management committee appointed and co-chaired by the Chief Executive Officer and Chief Risk Officer, which includes the most senior officers of the Firm from the business, independent risk functions and control groups, to help oversee the ERM framework. The FRC’s responsibilities include: oversight of our risk management principles, procedures, limits and tolerances; the monitoring of capital levels and material market, credit, model, operational, liquidity, legal, compliance and reputational risk matters, and other risks, as appropriate; and the steps management has taken to monitor and manage such risks. The FRC also establishes and communicates risk appetite, including aggregate Firm limits and tolerances, as appropriate. The Governance Process Review Subcommittee of the FRC oversees governance and process issues on behalf of the FRC. The FRC reports to the Board, the BAC, the BOTC and the BRC through the Chief Risk Officer, Chief Financial Officer, Chief Legal Officer and Head of Non-Financial Risk." }, { "status": "UNCHANGED", "current_title": "Chief Risk Officer", "prior_title": "Chief Risk Officer", "current_body": "The Chief Risk Officer, who is independent of business units, reports to the BRC and the Chief Executive Officer. The Chief Risk Officer oversees compliance with our risk limits; approves exceptions to our risk limits; independently reviews material market, credit, model and liquidity risks; and reviews results of risk management processes with the Board, the BRC, the BOTC and the BAC, as appropriate. The Chief Risk Officer also coordinates with the Head of NFR regarding non-financial risk, the Chief Financial Officer and the Chief Executive Officer regarding capital and liquidity management and works with the Compensation, Management Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation arrangements do not encourage unnecessary and excessive risk taking." }, { "status": "UNCHANGED", "current_title": "Legal, Regulatory and Compliance Risk", "prior_title": "Legal, Regulatory and Compliance Risk", "current_body": "Legal, regulatory and compliance risk includes the risk of legal or regulatory sanctions; material financial loss, including fines, penalties, judgments, damages and/or settlements; limitations on our business; or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing and anti-corruption rules and regulations. For more information on how we monitor and manage legal, regulatory and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal, Regulatory and Compliance Risk.”" }, { "status": "UNCHANGED", "current_title": "Deferred Cash-Based Compensation", "prior_title": "Deferred Cash-Based Compensation", "current_body": "The Firm sponsors a number of deferred cash-based compensation programs for current and former employees, which generally contain vesting, clawback and cancellation provisions. Employees are permitted to allocate the value of their deferred awards among a menu of notional investments, whereby the value of their awards will track the performance of the referenced notional investments. The menu of investments, which is selected by the Firm, includes fixed income, equity, commodity and money market funds. Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards. We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. At December 31, 2023 and December 31, 2022, substantially all employee referenced investments that subjected the Firm to price risk were economically hedged." }, { "status": "UNCHANGED", "current_title": "Quantitative and Qualitative Disclosures about Risk", "prior_title": "Quantitative and Qualitative Disclosures about Risk", "current_body": "Risk ManagementOverviewRisk is an inherent part of our businesses and activities. We believe effective risk management is vital to the success of our business activities. Accordingly, we have an ERM framework to integrate the diverse roles of risk management into a holistic enterprise structure and to facilitate the incorporation of risk assessment into decision-making processes across the Firm.We have policies and procedures in place to identify, measure, monitor, escalate, mitigate and control the principal risks involved in the activities of the Institutional Securities, Wealth Management and Investment Management business segments, as well as at the Parent Company level. The principal risks involved in our business activities are both financial and non-financial and include market (including non-trading risks), credit, liquidity, model, operational (including cybersecurity), compliance (including conduct), financial crime, strategic and reputational risks. Strategic risk is integrated into our business planning, embedded in the evaluation of all principal risks and overseen by the Board.The cornerstone of our risk management philosophy is the pursuit of risk-adjusted returns through prudent risk taking that protects our capital base and franchise. This philosophy is implemented through the ERM framework. Five key principles underlie this philosophy: integrity, comprehensiveness, independence, accountability and transparency. To help ensure the efficacy of risk management, which is an essential component of our reputation, senior management requires thorough and frequent reporting and the appropriate escalation of risk matters. The fast-paced, complex and constantly evolving nature of global financial markets requires us to maintain a risk management culture that is incisive, knowledgeable about specialized products and markets, and subject to ongoing review and enhancement.Our risk appetite defines the aggregate level and types of risk that the Firm is willing to accept to achieve its business objectives, taking into account the interests of clients and fiduciary duties to shareholders, as well as capital and other regulatory requirements. This risk appetite is embedded in our risk culture and linked to our short-term and long-term strategic, capital and financial plans, as well as compensation programs. This risk appetite and the related Board-level risk limits and risk tolerance statements are reviewed and approved by the BRC and the Board on at least an annual basis.Risk Governance StructureRisk management at the Firm requires independent Firm-level oversight, accountability of our business divisions, and effective communication of risk matters across the Firm, to senior management and ultimately to the Board. Our risk governance structure is set forth in the following chart and also includes risk managers, committees, and groups within and across business segments and operating legal entities. The ERM framework, composed of independent but complementary entities, facilitates efficient and comprehensive supervision of our risk exposures and processes. Risk ManagementOverviewRisk is an inherent part of our businesses and activities. We believe effective risk management is vital to the success of our business activities. Accordingly, we have an ERM framework to integrate the diverse roles of risk management into a holistic enterprise structure and to facilitate the incorporation of risk assessment into decision-making processes across the Firm.We have policies and procedures in place to identify, measure, monitor, escalate, mitigate and control the principal risks involved in the activities of the Institutional Securities, Wealth Management and Investment Management business segments, as well as at the Parent Company level. The principal risks involved in our business activities are both financial and non-financial and include market (including non-trading risks), credit, liquidity, model, operational (including cybersecurity), compliance (including conduct), financial crime, strategic and reputational risks. Strategic risk is integrated into our business planning, embedded in the evaluation of all principal risks and overseen by the Board.The cornerstone of our risk management philosophy is the pursuit of risk-adjusted returns through prudent risk taking that protects our capital base and franchise. This philosophy is implemented through the ERM framework. Five key principles underlie this philosophy: integrity, comprehensiveness, independence, accountability and transparency. To help ensure the efficacy of risk management, which is an essential component of our reputation, senior" }, { "status": "UNCHANGED", "current_title": "Risk Governance Structure", "prior_title": "Risk Governance Structure", "current_body": "Risk management at the Firm requires independent Firm-level oversight, accountability of our business divisions, and effective communication of risk matters across the Firm, to senior management and ultimately to the Board. Our risk governance structure is set forth in the following chart and also includes risk managers, committees, and groups within and across business segments and operating legal entities. The ERM framework, composed of independent but complementary entities, facilitates efficient and comprehensive supervision of our risk exposures and processes. RRP—Resolution and Recovery Planning 1.Committees include the Capital Commitment Committee, Global Large Loan Committee, Equity Underwriting Committee, Leveraged Finance Underwriting Committee and Municipal Capital Commitment Committee. 2.Committees include the Securities Risk Committee, Wealth Management Risk Committee and Investment Management Risk Committee. 61December 2023 Form 10-K 61December 2023 Form 10-K 61December 2023 Form 10-K 61 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents Morgan Stanley Board of DirectorsThe Board has oversight of the ERM framework and is responsible for helping to ensure that our risks are managed in a sound manner. The Board has authorized the committees within the ERM framework to help facilitate our risk oversight responsibilities. As set forth in the Board’s Corporate Governance Policies, the Board also oversees, and receives reports on, our financial performance, strategy and business plans, as well as our practices and procedures relating to reputational and franchise risk, and culture, values and conduct.Risk Committee of the BoardThe BRC assists the Board in its oversight of the ERM framework; oversees significant financial risk exposures of the Firm, including market, credit, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures; oversees our risk appetite statement, including risk tolerance levels and limits; reviews capital, liquidity and funding strategy and planning and related guidelines and policies; reviews the contingency funding plan and capital planning process; oversees our significant risk governance, risk management and risk assessment guidelines and policies; oversees the performance of the Chief Risk Officer; reviews reports from our Strategic Transactions Committee, CCAR Committee and RRP Committee; reviews significant new product risk, emerging risks, regulatory matters and climate risk; and reviews reports from the Chief Audit Officer regarding the results of reviews and assessments of the risk management, liquidity and capital functions. The BRC reports to the Board on a regular basis and coordinates with the Board and other Board committees with respect to oversight of risk management and risk assessment guidelines.Audit Committee of the BoardThe BAC oversees the integrity of our financial statements, compliance with legal and regulatory requirements, and system of internal controls; oversees risk management and risk assessment guidelines in coordination with the Board and other Board committees; reviews the major legal, compliance and financial crime risk exposures of the Firm and the steps management has taken to monitor and control such exposures; appoints, compensates, retains, oversees, evaluates and, when appropriate, replaces the independent auditor; oversees the qualifications, performance and independence of our independent auditor and pre-approves audit and permitted non-audit services; oversees the performance of our Chief Audit Officer; and, after review, recommends to the Board the acceptance and inclusion of the annual audited financial statements in the Firm’s annual report on Form 10-K. The BAC reports to the Board on a regular basis.Operations and Technology Committee of the BoardThe BOTC oversees our operations and technology strategy and significant investments in support of such strategy; oversees operational risk, including information technology, information security, fraud, third-party oversight, business disruption and resilience and cybersecurity risks and the steps management has taken to monitor and control such exposures. The BOTC reviews and approves significant operations and technology policies. The BOTC also reviews risk management and risk assessment guidelines in coordination with the Board and other Board committees, and policies regarding operational risk. The BOTC reports to the Board on a regular basis.Firm Risk CommitteeThe Board has also authorized the Firm Risk Committee (“FRC”), a management committee appointed and co-chaired by the Chief Executive Officer and Chief Risk Officer, which includes the most senior officers of the Firm from the business, independent risk functions and control groups, to help oversee the ERM framework. The FRC’s responsibilities include: oversight of our risk management principles, procedures, limits and tolerances; the monitoring of capital levels and material market, credit, model, operational, liquidity, legal, compliance and reputational risk matters, and other risks, as appropriate; and the steps management has taken to monitor and manage such risks. The FRC also establishes and communicates risk appetite, including aggregate Firm limits and tolerances, as appropriate. The Governance Process Review Subcommittee of the FRC oversees governance and process issues on behalf of the FRC. The FRC reports to the Board, the BAC, the BOTC and the BRC through the Chief Risk Officer, Chief Financial Officer, Chief Legal Officer and Head of Non-Financial Risk.Functional Risk and Control CommitteesFunctional risk and control committees and other committees within the ERM framework facilitate efficient and comprehensive supervision of our risk exposures and processes.Each business segment has a risk committee that is responsible for helping to ensure that the business segment, as applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement, monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework established by the FRC; and reviews, on a periodic basis, our aggregate risk exposures, risk exception experience, and the efficacy of our risk identification, measurement, monitoring and management policies and procedures, and related controls. Morgan Stanley Board of DirectorsThe Board has oversight of the ERM framework and is responsible for helping to ensure that our risks are managed in a sound manner. The Board has authorized the committees within the ERM framework to help facilitate our risk oversight responsibilities. As set forth in the Board’s Corporate Governance Policies, the Board also oversees, and receives reports on, our financial performance, strategy and business plans, as well as our practices and procedures relating to reputational and franchise risk, and culture, values and conduct.Risk Committee of the BoardThe BRC assists the Board in its oversight of the ERM framework; oversees significant financial risk exposures of the Firm, including market, credit, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures; oversees our risk appetite statement, including risk tolerance levels and limits; reviews capital, liquidity and funding strategy and planning and related guidelines and policies; reviews the contingency funding plan and capital planning process; oversees our significant risk governance, risk management and risk assessment guidelines and policies; oversees the performance of the Chief Risk Officer; reviews reports from our Strategic Transactions Committee, CCAR Committee and RRP Committee; reviews significant new product risk, emerging risks, regulatory matters and climate risk; and reviews reports from the Chief Audit Officer regarding the results of reviews and assessments of the risk management, liquidity and capital functions. The BRC reports to the Board on a regular basis and coordinates with the Board and other Board committees with respect to oversight of risk management and risk assessment guidelines.Audit Committee of the BoardThe BAC oversees the integrity of our financial statements, compliance with legal and regulatory requirements, and system of internal controls; oversees risk management and risk assessment guidelines in coordination with the Board and other Board committees; reviews the major legal, compliance and financial crime risk exposures of the Firm and the steps management has taken to monitor and control such exposures; appoints, compensates, retains, oversees, evaluates and, when appropriate, replaces the independent auditor; oversees the qualifications, performance and independence of our independent auditor and pre-approves audit and permitted non-audit services; oversees the performance of our Chief Audit Officer; and, after review, recommends to the Board the acceptance and inclusion of the annual audited financial statements in the Firm’s annual report on Form 10-K. The BAC reports to the Board on a regular basis." }, { "status": "UNCHANGED", "current_title": "Value-at-Risk", "prior_title": "Value-at-Risk", "current_body": "The statistical technique known as VaR is one of the tools we use to measure, monitor and review the market risk exposures of our trading portfolios. The Market Risk Department calculates and distributes daily VaR-based risk measures to various levels of management. We estimate VaR using a model based on a one-year equal-weighted historical simulation for general market risk factors and name-specific risk in corporate equities and related derivatives, and Monte Carlo simulation for name-specific risk in bonds, loans and related derivatives. The model constructs a distribution of hypothetical daily changes in the value of trading portfolios based on historical observation of daily changes in key market indices or other market risk factors, and information on the sensitivity of the portfolio values to these market risk factor changes. VaR for risk management purposes (“Management VaR”) is computed at a 95% level of confidence over a one-day time horizon, which is a useful indicator of possible trading losses resulting from adverse daily market moves. The 95%/one-day VaR corresponds to the unrealized loss in portfolio value that, based on historically observed market risk factor movements, would have been exceeded with a frequency of 5%, or five times in every 100 trading days, if the portfolio were held constant for one day. Our VaR model generally takes into account linear and non-linear exposures to equity and commodity price risk, interest rate risk, credit spread risk and foreign exchange rates. The model also takes into account linear exposures to implied volatility risks for all asset classes and non-linear exposures to implied volatility risks for equity, commodity and foreign exchange referenced products. The VaR model also captures certain implied correlation risks associated with portfolio credit derivatives, as well as certain basis risks (e.g., corporate debt and related credit derivatives). 65December 2023 Form 10-K 65December 2023 Form 10-K 65December 2023 Form 10-K 65 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents We use VaR as one of a range of risk management tools. Among their benefits, VaR models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of varied market risks and portfolio assets. One key element of the VaR model is that it reflects risk reduction due to portfolio diversification or hedging activities. However, VaR has various limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR.The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures. VaR is most appropriate as a risk measure for trading positions in liquid financial markets and will understate the risk associated with severe events, such as periods of extreme illiquidity. We are aware of these and other limitations and, therefore, use VaR as only one component in our risk management oversight process. This process also incorporates stress testing and scenario analyses and extensive risk monitoring, analysis and control at the trading desk, division and Firm levels.We update our VaR model in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. We are committed to continuous review and enhancement of VaR methodologies and assumptions in order to capture evolving risks associated with changes in market structure and dynamics. As part of our regular process improvements, additional systematic and name-specific risk factors may be added to improve the VaR model’s ability to more accurately estimate risks to specific asset classes or industry sectors.Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or of our ability to monitor and manage risk. There can be no assurance that our actual losses on a particular day will not exceed the VaR amounts indicated in the following tables or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses that, should they occur, may be significantly greater than the VaR amount.VaR statistics are not readily comparable across firms because of differences in the firms’ portfolios, modeling assumptions and methodologies. These differences can result in materially different VaR estimates across firms for similar portfolios. The impact of such differences varies depending on the factor history assumptions, the frequency with which the factor history is updated and the confidence level. As a result, VaR statistics are more useful when interpreted as indicators of trends in a firm’s risk profile rather than as an absolute measure of risk to be compared across firms.Our regulators have approved the same VaR model we use for risk management purposes for use in regulatory calculations.The portfolio of positions used for Management VaR differs from that used for Regulatory VaR. Management VaR contains certain positions that are excluded from Regulatory VaR. 95%/One-Day Management VaR 2023$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$29 $34 $43 $27 Equity price19 24 38 15 Foreign exchange rate6 9 18 5 Commodity price11 17 35 10 Less: Diversification benefit2(27)(40)N/AN/APrimary Risk Categories$38 $44 $60 $33 Credit Portfolio25 21 25 18 Less: Diversification benefit2(22)(15)N/AN/ATotal Management VaR$41 $50 $72 $41 2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 41 15 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure. 2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. Average Total Management VaR and Average Management VaR for the Primary Risk Categories decreased in 2023 from 2022 primarily due to reduced exposure in the Commodity price risk category and lower market volatility.Distribution of VaR Statistics and Net RevenuesWe evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There were 16 trading loss days in 2023, one of which exceeded 95% Total Management VaR, compared to 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR. We use VaR as one of a range of risk management tools. Among their benefits, VaR models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of varied market risks and portfolio assets. One key element of the VaR model is that it reflects risk reduction due to portfolio diversification or hedging activities. However, VaR has various limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR.The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures. VaR is most appropriate as a risk measure for trading positions in liquid financial markets and will understate the risk associated with severe events, such as periods of extreme illiquidity. We are aware of these and other limitations and, therefore, use VaR as only one component in our risk management oversight process. This process also incorporates stress testing and scenario analyses and extensive risk monitoring, analysis and control at the trading desk, division and Firm levels.We update our VaR model in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. We are committed to continuous review and enhancement of VaR methodologies and assumptions in order to capture evolving risks associated with changes in market structure and dynamics. As part of our regular process improvements, additional systematic and name-specific risk factors may be added to improve the VaR model’s ability to more accurately estimate risks to specific asset classes or industry sectors.Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or of our ability to monitor and manage risk. There can be no assurance that our actual losses on a particular day will not exceed the VaR amounts indicated in the following tables or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses that, should they occur, may be significantly greater than the VaR amount.VaR statistics are not readily comparable across firms because of differences in the firms’ portfolios, modeling assumptions and methodologies. These differences can result in materially different VaR estimates across firms for similar portfolios. The impact of such differences varies depending on the factor history assumptions, the frequency with which the factor We use VaR as one of a range of risk management tools. Among their benefits, VaR models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of varied market risks and portfolio assets. One key element of the VaR model is that it reflects risk reduction due to portfolio diversification or hedging activities. However, VaR has various limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR. The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures. VaR is most appropriate as a risk measure for trading positions in liquid financial markets and will understate the risk associated with severe events, such as periods of extreme illiquidity. We are aware of these and other limitations and, therefore, use VaR as only one component in our risk management oversight process. This process also incorporates stress testing and scenario analyses and extensive risk monitoring, analysis and control at the trading desk, division and Firm levels. We update our VaR model in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. We are committed to continuous review and enhancement of VaR methodologies and assumptions in order to capture evolving risks associated with changes in market structure and dynamics. As part of our regular process improvements, additional systematic and name-specific risk factors may be added to improve the VaR model’s ability to more accurately estimate risks to specific asset classes or industry sectors. Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or of our ability to monitor and manage risk. There can be no assurance that our actual losses on a particular day will not exceed the VaR amounts indicated in the following tables or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses that, should they occur, may be significantly greater than the VaR amount. VaR statistics are not readily comparable across firms because of differences in the firms’ portfolios, modeling assumptions and methodologies. These differences can result in materially different VaR estimates across firms for similar portfolios. The impact of such differences varies depending on the factor history assumptions, the frequency with which the factor history is updated and the confidence level. As a result, VaR statistics are more useful when interpreted as indicators of trends in a firm’s risk profile rather than as an absolute measure of risk to be compared across firms.Our regulators have approved the same VaR model we use for risk management purposes for use in regulatory calculations.The portfolio of positions used for Management VaR differs from that used for Regulatory VaR. Management VaR contains certain positions that are excluded from Regulatory VaR. 95%/One-Day Management VaR 2023$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$29 $34 $43 $27 Equity price19 24 38 15 Foreign exchange rate6 9 18 5 Commodity price11 17 35 10 Less: Diversification benefit2(27)(40)N/AN/APrimary Risk Categories$38 $44 $60 $33 Credit Portfolio25 21 25 18 Less: Diversification benefit2(22)(15)N/AN/ATotal Management VaR$41 $50 $72 $41 2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 41 15 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure. 2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. Average Total Management VaR and Average Management VaR for the Primary Risk Categories decreased in 2023 from 2022 primarily due to reduced exposure in the Commodity price risk category and lower market volatility.Distribution of VaR Statistics and Net RevenuesWe evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There were 16 trading loss days in 2023, one of which exceeded 95% Total Management VaR, compared to 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR. history is updated and the confidence level. As a result, VaR statistics are more useful when interpreted as indicators of trends in a firm’s risk profile rather than as an absolute measure of risk to be compared across firms. Our regulators have approved the same VaR model we use for risk management purposes for use in regulatory calculations. The portfolio of positions used for Management VaR differs from that used for Regulatory VaR. Management VaR contains certain positions that are excluded from Regulatory VaR." }, { "status": "UNCHANGED", "current_title": "Required and Actual TLAC and Eligible LTD Ratios", "prior_title": "Required and Actual TLAC and Eligible LTD Ratios", "current_body": "ActualAmount/Ratio$ in millionsRegulatory MinimumRequired Ratio1AtDecember 31,2023 AtDecember 31,2022 External TLAC2$250,914 $245,951 External TLAC as a % of RWA18.0 %21.5 %55.0 %54.9 %External TLAC as a % of leverage exposure7.5 %9.5 %17.6 %17.6 %Eligible LTD3$162,547 $159,444 Eligible LTD as a % of RWA9.0 %9.0 %35.6 %35.6 %Eligible LTD as a % of leverage exposure4.5 %4.5 %11.4 %11.4 % Required Ratio1 External TLAC2 Eligible LTD3 1.Required ratios are inclusive of applicable buffers. 2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD. 3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. Furthermore, under the clean holding company requirements, a covered BHC is prohibited from incurring any external debt with an original maturity of less than one year or certain other liabilities, regardless of whether the liabilities are fully secured or otherwise senior to eligible LTD, or entering into certain other prohibited transactions. Certain other external liabilities, including those with certain embedded features noted above, are subject to a cap equal to 5% of the covered BHC’s outstanding external TLAC amount. Additionally, as of April 1, 2021, we and our U.S. Bank Subsidiaries are required to make certain deductions from regulatory capital for investments in certain unsecured debt instruments (including eligible LTD in the TLAC framework) issued by the Parent Company or other G-SIBs. We are in compliance with all TLAC requirements as of December 31, 2023 and December 31, 2022." }, { "status": "UNCHANGED", "current_title": "Audit Committee of the Board", "prior_title": "Audit Committee of the Board", "current_body": "The BAC oversees the integrity of our financial statements, compliance with legal and regulatory requirements, and system of internal controls; oversees risk management and risk assessment guidelines in coordination with the Board and other Board committees; reviews the major legal, compliance and financial crime risk exposures of the Firm and the steps management has taken to monitor and control such exposures; appoints, compensates, retains, oversees, evaluates and, when appropriate, replaces the independent auditor; oversees the qualifications, performance and independence of our independent auditor and pre-approves audit and permitted non-audit services; oversees the performance of our Chief Audit Officer; and, after review, recommends to the Board the acceptance and inclusion of the annual audited financial statements in the Firm’s annual report on Form 10-K. The BAC reports to the Board on a regular basis. Operations and Technology Committee of the BoardThe BOTC oversees our operations and technology strategy and significant investments in support of such strategy; oversees operational risk, including information technology, information security, fraud, third-party oversight, business disruption and resilience and cybersecurity risks and the steps management has taken to monitor and control such exposures. The BOTC reviews and approves significant operations and technology policies. The BOTC also reviews risk management and risk assessment guidelines in coordination with the Board and other Board committees, and policies regarding operational risk. The BOTC reports to the Board on a regular basis.Firm Risk CommitteeThe Board has also authorized the Firm Risk Committee (“FRC”), a management committee appointed and co-chaired by the Chief Executive Officer and Chief Risk Officer, which includes the most senior officers of the Firm from the business, independent risk functions and control groups, to help oversee the ERM framework. The FRC’s responsibilities include: oversight of our risk management principles, procedures, limits and tolerances; the monitoring of capital levels and material market, credit, model, operational, liquidity, legal, compliance and reputational risk matters, and other risks, as appropriate; and the steps management has taken to monitor and manage such risks. The FRC also establishes and communicates risk appetite, including aggregate Firm limits and tolerances, as appropriate. The Governance Process Review Subcommittee of the FRC oversees governance and process issues on behalf of the FRC. The FRC reports to the Board, the BAC, the BOTC and the BRC through the Chief Risk Officer, Chief Financial Officer, Chief Legal Officer and Head of Non-Financial Risk.Functional Risk and Control CommitteesFunctional risk and control committees and other committees within the ERM framework facilitate efficient and comprehensive supervision of our risk exposures and processes.Each business segment has a risk committee that is responsible for helping to ensure that the business segment, as applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement, monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework established by the FRC; and reviews, on a periodic basis, our aggregate risk exposures, risk exception experience, and the efficacy of our risk identification, measurement, monitoring and management policies and procedures, and related controls." }, { "status": "UNCHANGED", "current_title": "Institutional Securities—Fixed Income and Equities", "prior_title": "Institutional Securities—Fixed Income and Equities", "current_body": "Fixed income and Equities net revenues are composed of Trading revenues, Commissions and fees, Asset management revenues, Net interest, and certain Investments and Other December 2023 Form 10-K34 December 2023 Form 10-K34 December 2023 Form 10-K34 34 Table of Contents Management’s Discussion and Analysis Table of Contents Management’s Discussion and Analysis Table of Contents revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing and liquidity costs incurred, which are reflected in Net interest for securities lending products, and in Trading revenues for derivative products. Fees for providing fund administration services are reflected in Asset management revenues.Equity—Execution services. A significant portion of the results for this business is generated by commissions and fees from executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC transactions. We make markets for our clients principally in equity-related securities and derivative products, including those that provide liquidity and are utilized for hedging. Market-making also generates gains and losses on inventory held to facilitate client activity, which are reflected in Trading revenues. Execution services also includes certain Investments and Other revenues.Fixed income—Within fixed income, we make markets in various flow and structured products in order to facilitate client activity as part of the following products and services:•Global macro products. We make markets for our clients in interest rate, foreign exchange and emerging market products, including exchange-traded and OTC securities and derivative instruments. The results of this market-making activity are primarily driven by gains and losses from buying and selling positions to stand ready for and satisfy client demand and are recorded in Trading revenues.•Credit products. We make markets in credit-sensitive products, such as corporate bonds and mortgage securities and other securitized products, and related derivative instruments. The values of positions in this business are sensitive to changes in credit spreads and interest rates, which result in gains and losses reflected in Trading revenues. We undertake lending activities, which include commercial mortgage lending, secured lending facilities and financing extended to sales and trading customers. Due to the amount and type of the interest-bearing securities and loans making up this business, a significant portion of the results is also reflected in Net interest revenues.•Commodities products and Other. We make markets in various commodity products related primarily to electricity, natural gas, oil and metals. Other activities primarily include results from the centralized management of our fixed income derivative counterparty exposures and the management of derivative counterparty risk. These activities are primarily recorded in Trading revenues.Fixed income also includes certain Investments and Other revenues.Institutional Securities—Other Net RevenuesOther net revenues include impacts from certain treasury functions, such as liquidity and funding costs and gains and losses on economic hedges related to certain borrowings. Other net revenues also include mark-to-market gains and losses on held-for-sale corporate loans and lending commitments, as well as net interest and gain and losses on economic hedges associated with held-for-sale and held-for-investment corporate loans and lending commitments. Also included are gains and losses from financial instruments used to economically hedge compensation expense related to certain DCP, income and losses from the equity method investment related to our Japanese securities joint venture with MUFG, as well as Investments and Other revenues that are not directly attributable to Fixed income and Equities businesses.Compensation ExpenseCompensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of DCP investments, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits.The factors that drive compensation for our employees vary from period to period, from segment to segment and within a segment. For certain revenue-producing employees in the Wealth Management and Investment Management business segments, compensation is largely paid on the basis of formulaic payouts that link employee compensation to revenues. Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the performance of the Firm, business unit and individual.Compensation expense for DCP is recognized over the relevant vesting period and is adjusted based on the fair value of the referenced investments until distribution. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses.Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items.Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing and liquidity costs incurred, which are reflected in Net interest for securities lending products, and in Trading revenues for derivative products. Fees for providing fund administration services are reflected in Asset management revenues.Equity—Execution services. A significant portion of the results for this business is generated by commissions and fees from executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC transactions. We make markets for our clients principally in equity-related securities and derivative products, including those that provide liquidity and are utilized for hedging. Market-making also generates gains and losses on inventory held to facilitate client activity, which are reflected in Trading revenues. Execution services also includes certain Investments and Other revenues.Fixed income—Within fixed income, we make markets in various flow and structured products in order to facilitate client activity as part of the following products and services:•Global macro products. We make markets for our clients in interest rate, foreign exchange and emerging market products, including exchange-traded and OTC securities and derivative instruments. The results of this market-making activity are primarily driven by gains and losses from buying and selling positions to stand ready for and satisfy client demand and are recorded in Trading revenues.•Credit products. We make markets in credit-sensitive products, such as corporate bonds and mortgage securities and other securitized products, and related derivative instruments. The values of positions in this business are sensitive to changes in credit spreads and interest rates, which result in gains and losses reflected in Trading revenues. We undertake lending activities, which include commercial mortgage lending, secured lending facilities and financing extended to sales and trading customers. Due to the amount and type of the interest-bearing securities and loans making up this business, a significant portion of the results is also reflected in Net interest revenues. revenues directly attributable to those businesses. These revenues, which can be affected by a variety of interrelated factors, including market volumes, bid-offer spreads and the impact of market conditions on inventory held to facilitate client activity, as well as the effect of hedging activity, are viewed in the aggregate when assessing the performance and profitability of our businesses. Following is a description of the revenue-generating activities within our equity and fixed income businesses, as well as how their results impact the income statement line items. Equity—Financing. We provide financing, prime brokerage and fund administration services to our clients active in the equity markets through a variety of products, including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing and liquidity costs incurred, which are reflected in Net interest for securities lending products, and in Trading revenues for derivative products. Fees for providing fund administration services are reflected in Asset management revenues. Equity—Execution services. A significant portion of the results for this business is generated by commissions and fees from executing and clearing client transactions on major stock and derivative exchanges, as well as from OTC transactions. We make markets for our clients principally in equity-related securities and derivative products, including those that provide liquidity and are utilized for hedging. Market-making also generates gains and losses on inventory held to facilitate client activity, which are reflected in Trading revenues. Execution services also includes certain Investments and Other revenues. Fixed income—Within fixed income, we make markets in various flow and structured products in order to facilitate client activity as part of the following products and services: •Global macro products. We make markets for our clients in interest rate, foreign exchange and emerging market products, including exchange-traded and OTC securities and derivative instruments. The results of this market-making activity are primarily driven by gains and losses from buying and selling positions to stand ready for and satisfy client demand and are recorded in Trading revenues. •Credit products. We make markets in credit-sensitive products, such as corporate bonds and mortgage securities and other securitized products, and related derivative instruments. The values of positions in this business are sensitive to changes in credit spreads and interest rates, which result in gains and losses reflected in Trading revenues. We undertake lending activities, which include commercial mortgage lending, secured lending facilities and financing extended to sales and trading customers. Due to the amount and type of the interest-bearing securities and loans making up this business, a significant portion of the results is also reflected in Net interest revenues. •Commodities products and Other. We make markets in various commodity products related primarily to electricity, natural gas, oil and metals. Other activities primarily include results from the centralized management of our fixed income derivative counterparty exposures and the management of derivative counterparty risk. These activities are primarily recorded in Trading revenues.Fixed income also includes certain Investments and Other revenues.Institutional Securities—Other Net RevenuesOther net revenues include impacts from certain treasury functions, such as liquidity and funding costs and gains and losses on economic hedges related to certain borrowings. Other net revenues also include mark-to-market gains and losses on held-for-sale corporate loans and lending commitments, as well as net interest and gain and losses on economic hedges associated with held-for-sale and held-for-investment corporate loans and lending commitments. Also included are gains and losses from financial instruments used to economically hedge compensation expense related to certain DCP, income and losses from the equity method investment related to our Japanese securities joint venture with MUFG, as well as Investments and Other revenues that are not directly attributable to Fixed income and Equities businesses.Compensation ExpenseCompensation and benefits expenses include base salaries and fixed allowances, formulaic programs, discretionary incentive compensation, amortization of deferred cash and equity awards, changes in the fair value of DCP investments, including the Firm’s share price for certain awards, carried interest allocated to employees, severance costs, and other items such as health and welfare benefits.The factors that drive compensation for our employees vary from period to period, from segment to segment and within a segment. For certain revenue-producing employees in the Wealth Management and Investment Management business segments, compensation is largely paid on the basis of formulaic payouts that link employee compensation to revenues. Compensation for other employees, including revenue-producing employees in the Institutional Securities business segment, include base salary and benefits and may also include incentive compensation that is determined following the assessment of the performance of the Firm, business unit and individual.Compensation expense for DCP is recognized over the relevant vesting period and is adjusted based on the fair value of the referenced investments until distribution. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments made by the Firm, there is typically a timing difference between the •Commodities products and Other. We make markets in various commodity products related primarily to electricity, natural gas, oil and metals. Other activities primarily include results from the centralized management of our fixed income derivative counterparty exposures and the management of derivative counterparty risk. These activities are primarily recorded in Trading revenues. Fixed income also includes certain Investments and Other revenues." }, { "status": "UNCHANGED", "current_title": "Credit Evaluation", "prior_title": "Credit Evaluation", "current_body": "The evaluation of corporate and institutional counterparties and borrowers includes assigning credit ratings, which reflect an assessment of an obligor’s probability of default and loss given default. Credit evaluations typically involve the assessment of financial statements; leverage; liquidity; capital strength; asset composition and quality; market capitalization; access to capital markets; adequacy of collateral, if applicable; and, in the case of certain loans, cash flow projections and debt service requirements. The CRM also evaluates strategy, market position, industry dynamics, management and other factors such as country risks and legal and contingent risks that could affect the obligor’s risk profile. Additionally, the CRM evaluates the relative position of our exposure in the borrower’s capital structure and relative recovery prospects, as well as other structural elements of the particular transaction. The underwriting of commercial real estate loans includes, but is not limited to, review of the property type, LTV ratio, occupancy levels, debt service ratio, prevailing capitalization rates and market dynamics. The evaluation of consumer borrowers is tailored to the specific type of lending. Securities-based loans are evaluated based on factors that include, but are not limited to, the amount of the loan and the amount, quality, diversification, price volatility and liquidity of the collateral. The underwriting of residential real estate loans includes, but is not limited to, review of the obligor’s debt-to-income ratio, net worth, liquidity, collateral, LTV ratio and industry standard credit-scoring models (e.g., FICO scores). Subsequent credit monitoring for individual loans is performed at the portfolio level, and collateral values are monitored on an ongoing basis. Credit risk metrics assigned to our borrowers during the evaluation process are incorporated into the CRM maintenance of the allowance for credit losses. Such allowance serves as a reserve for expected inherent losses, as well as expected losses related to loans identified as impaired. For more information on the allowance for credit losses, see Notes 2 and 9 to the financial statements." }, { "status": "UNCHANGED", "current_title": "Primary Market Risk Exposures and Market Risk Management", "prior_title": "Primary Market Risk Exposures and Market Risk Management", "current_body": "We have exposures to a wide range of risks related to interest rates and credit spreads, equity prices, foreign exchange rates and commodity prices as well as the associated implied volatilities, correlations and spreads of the global markets in which we conduct our trading activities. We are exposed to interest rate and credit spread risk as a result of our market-making activities and other trading in interest rate-sensitive financial instruments (i.e., risk arising from changes in the level or implied volatility of interest rates, the timing of mortgage prepayments, the shape of the yield curve and/or credit spreads). The activities from which those exposures arise and the markets in which we are active include, but are not limited to, the following: derivatives, corporate and government debt across both developed and emerging markets and asset-backed debt, including mortgage-related securities. We are exposed to equity price, correlation and implied volatility risk as a result of making markets in equity securities and derivatives and maintaining other positions, including positions in non-public entities. Positions in non-public entities may include, but are not limited to, exposures to private equity, venture capital, private partnerships, real estate funds and other funds. Such positions are less liquid, have longer investment horizons and are more difficult to hedge than listed equities. We are exposed to foreign exchange rate, correlation and implied volatility risk as a result of making markets in foreign currencies and foreign currency derivatives, from maintaining foreign exchange positions and from holding non-U.S. dollar-denominated financial instruments. We are exposed to commodity price and implied volatility risk as a result of market-making activities in commodity products related primarily to electricity, natural gas, oil and precious metals. Commodity exposures are subject to periods of high price volatility as a result of changes in supply and demand. These changes can be caused by weather conditions, physical production and transportation, or geopolitical and other events that affect the available supply and level of demand for these commodities. We manage our trading positions by employing a variety of risk-mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Hedging activities may not always provide effective mitigation against trading losses due to differences in the terms, specific characteristics or other basis risks that may exist between the hedge instrument and the risk exposure that is being hedged.We manage the market risk associated with our trading activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis. We manage and monitor our market risk exposures in such a way as to maintain a portfolio that we believe is well diversified in the aggregate with respect to market risk factors and that reflects our aggregate risk tolerance as established by our senior management.Aggregate market risk limits have been approved for the Firm across all divisions worldwide. Additional market risk limits are assigned to trading desks and, as appropriate, products and regions. Trading division risk managers, desk risk managers, traders and the Market Risk Department monitor market risk measures against limits in accordance with policies set by our senior management.Value-at-RiskThe statistical technique known as VaR is one of the tools we use to measure, monitor and review the market risk exposures of our trading portfolios. The Market Risk Department calculates and distributes daily VaR-based risk measures to various levels of management.We estimate VaR using a model based on a one-year equal-weighted historical simulation for general market risk factors and name-specific risk in corporate equities and related derivatives, and Monte Carlo simulation for name-specific risk in bonds, loans and related derivatives. The model constructs a distribution of hypothetical daily changes in the value of trading portfolios based on historical observation of daily changes in key market indices or other market risk factors, and information on the sensitivity of the portfolio values to these market risk factor changes.VaR for risk management purposes (“Management VaR”) is computed at a 95% level of confidence over a one-day time horizon, which is a useful indicator of possible trading losses resulting from adverse daily market moves. The 95%/one-day VaR corresponds to the unrealized loss in portfolio value that, based on historically observed market risk factor movements, would have been exceeded with a frequency of 5%, or five times in every 100 trading days, if the portfolio were held constant for one day.Our VaR model generally takes into account linear and non-linear exposures to equity and commodity price risk, interest rate risk, credit spread risk and foreign exchange rates. The model also takes into account linear exposures to implied volatility risks for all asset classes and non-linear exposures to implied volatility risks for equity, commodity and foreign exchange referenced products. The VaR model also captures certain implied correlation risks associated with portfolio credit derivatives, as well as certain basis risks (e.g., corporate debt and related credit derivatives). terms, specific characteristics or other basis risks that may exist between the hedge instrument and the risk exposure that is being hedged. We manage the market risk associated with our trading activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis. We manage and monitor our market risk exposures in such a way as to maintain a portfolio that we believe is well diversified in the aggregate with respect to market risk factors and that reflects our aggregate risk tolerance as established by our senior management. Aggregate market risk limits have been approved for the Firm across all divisions worldwide. Additional market risk limits are assigned to trading desks and, as appropriate, products and regions. Trading division risk managers, desk risk managers, traders and the Market Risk Department monitor market risk measures against limits in accordance with policies set by our senior management." }, { "status": "UNCHANGED", "current_title": "The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.", "prior_title": "The application of regulatory requirements and strategies in the U.S. or other jurisdictions to facilitate the orderly resolution of large financial institutions may pose a greater risk of loss for our security holders and subject us to other restrictions.", "current_body": "We are required to submit once every two years to the Federal Reserve and the FDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. If the Federal Reserve and the FDIC were to jointly determine that our resolution plan submission was not credible or would not facilitate an orderly resolution, and if we were unsuccessful in addressing any deficiencies identified by the regulators, we or any of our subsidiaries may be subject to more stringent capital, leverage, or liquidity requirements or restrictions on our growth, activities or operations, or after a two-year period, we may be required to divest assets or operations. In addition, provided that certain procedures are met, we can be subject to a resolution proceeding under the orderly liquidation authority under Title II of the Dodd-Frank Act with the FDIC being appointed as receiver instead of being resolved under the U.S. Bankruptcy Code. The FDIC’s power under the orderly liquidation authority to disregard the priority of creditor claims and treat similarly situated creditors differently in certain circumstances, subject to certain limitations, could adversely impact holders of our unsecured debt. See “Business—Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements.”Further, because both our resolution plan contemplates an SPOE strategy under the U.S. Bankruptcy Code and the FDIC has proposed an SPOE strategy through which it may apply its orderly liquidation authority powers, we believe that the application of an SPOE strategy is the reasonably likely outcome if either our resolution plan were implemented or a resolution proceeding were commenced under the orderly liquidation authority. An SPOE strategy generally contemplates the provision of adequate capital and liquidity by the Parent Company to certain of its subsidiaries so that such subsidiaries have the resources necessary to implement the resolution strategy, and the Parent Company has entered into a secured amended and restated support agreement with such entities, pursuant to which it would provide such capital and liquidity to such entities.In addition, a wholly owned, direct subsidiary of the Parent Company, Morgan Stanley Holdings LLC (“Funding IHC”), serves as a resolution funding vehicle. The Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to the Funding IHC. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its material assets that can be contributed under the terms of the amended and restated support agreement (other than shares in subsidiaries of the Parent Company and certain other assets) to the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to certain supported subsidiaries, pursuant to the terms of the secured amended and restated support agreement.The obligations of the Parent Company and of the Funding IHC, respectively, under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets), and the assets of the Funding IHC, as applicable. As a result, claims of certain supported subsidiaries, including the Funding IHC, against the assets of the Parent Company with respect to such secured assets are effectively senior to unsecured obligations of the Parent Company.Although an SPOE strategy, whether applied pursuant to our resolution plan or in a resolution proceeding under the orderly liquidation authority, is intended to result in better outcomes for creditors overall, there is no guarantee that the application of an SPOE strategy, including the provision of support to the Parent Company’s supported subsidiaries pursuant to the secured amended and restated support agreement, will not result in greater losses for holders of our securities compared with a different resolution strategy for us.Regulators have taken and proposed various actions to facilitate an SPOE strategy under the U.S. Bankruptcy Code, debt. See “Business—Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements.” Further, because both our resolution plan contemplates an SPOE strategy under the U.S. Bankruptcy Code and the FDIC has proposed an SPOE strategy through which it may apply its orderly liquidation authority powers, we believe that the application of an SPOE strategy is the reasonably likely outcome if either our resolution plan were implemented or a resolution proceeding were commenced under the orderly liquidation authority. An SPOE strategy generally contemplates the provision of adequate capital and liquidity by the Parent Company to certain of its subsidiaries so that such subsidiaries have the resources necessary to implement the resolution strategy, and the Parent Company has entered into a secured amended and restated support agreement with such entities, pursuant to which it would provide such capital and liquidity to such entities. In addition, a wholly owned, direct subsidiary of the Parent Company, Morgan Stanley Holdings LLC (“Funding IHC”), serves as a resolution funding vehicle. The Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to the Funding IHC. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its material assets that can be contributed under the terms of the amended and restated support agreement (other than shares in subsidiaries of the Parent Company and certain other assets) to the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to certain supported subsidiaries, pursuant to the terms of the secured amended and restated support agreement. The obligations of the Parent Company and of the Funding IHC, respectively, under the amended and restated support agreement are in most cases secured on a senior basis by the assets of the Parent Company (other than shares in subsidiaries of the Parent Company and certain other assets), and the assets of the Funding IHC, as applicable. As a result, claims of certain supported subsidiaries, including the Funding IHC, against the assets of the Parent Company with respect to such secured assets are effectively senior to unsecured obligations of the Parent Company. Although an SPOE strategy, whether applied pursuant to our resolution plan or in a resolution proceeding under the orderly liquidation authority, is intended to result in better outcomes for creditors overall, there is no guarantee that the application of an SPOE strategy, including the provision of support to the Parent Company’s supported subsidiaries pursuant to the secured amended and restated support agreement, will not result in greater losses for holders of our securities compared with a different resolution strategy for us. Regulators have taken and proposed various actions to facilitate an SPOE strategy under the U.S. Bankruptcy Code, 19December 2023 Form 10-K 19December 2023 Form 10-K 19December 2023 Form 10-K 19 Table of Contents Table of Contents Table of Contents the orderly liquidation authority and other resolution regimes. For example, the Federal Reserve requires top-tier BHCs of U.S. G-SIBs, including the Firm, to maintain adequate TLAC, including equity and eligible long-term debt, in order to ensure that such institutions have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of debt to equity or otherwise by imposing losses on eligible TLAC where the SPOE strategy is used. The combined implication of the SPOE resolution strategy and the TLAC requirement is that our losses will be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on the creditors of our supported subsidiaries without requiring taxpayer or government financial support.In addition, certain jurisdictions, including the U.K. and E.U. jurisdictions, have implemented, or are in the process of implementing, changes to resolution regimes to provide resolution authorities with the ability to recapitalize a failing entity organized in such jurisdiction by writing down certain unsecured liabilities or converting certain unsecured liabilities into equity. Such “bail-in” powers are intended to enable the recapitalization of a failing institution by allocating losses to its shareholders and unsecured creditors. This may increase the overall level of capital and liquidity required by us on a consolidated basis and may result in limitations on our ability to efficiently distribute capital and liquidity among our affiliated entities, including in times of stress. Non-U.S. regulators are also considering requirements that certain subsidiaries of large financial institutions maintain minimum amounts of TLAC that would pass losses up from the subsidiaries to the Parent Company and, ultimately, to security holders of the Parent Company in the event of failure.We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements.We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve.In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”The financial services industry faces substantial litigation and is subject to extensive regulatory and law enforcement investigations, and we may face damage to our reputation and legal liability.As a global financial services firm, we face the risk of investigations and proceedings by governmental and self-regulatory organizations in all countries in which we conduct our business. These investigations and proceedings, as well as the amount of penalties and fines sought, continue to impact the financial services industry. Certain U.S. and international governmental entities have brought criminal actions against, or have sought criminal convictions, pleas, deferred prosecution agreements or non-prosecution agreements from financial institutions. Significant regulatory or law enforcement action against us could materially adversely affect our business, reputation, financial condition or results of operations, and increase our exposure to civil litigation.Investigations and proceedings initiated by these authorities may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions or other relief, and have included and may in the future include requirements that the Firm admit certain conduct, which may result in increased exposure to civil litigation. In addition, these measures have caused and may in the future cause collateral consequences. For example, such matters could impact our ability to engage in, or impose limitations on, certain of our businesses.As part of the resolution of certain investigations and proceedings, the Firm has been and may in the future be required to undertake certain measures and failure to do so may result in adverse consequences, such as further investigations or proceedings—both civil and criminal—and additional penalties, fines, judgments or other relief.The Dodd-Frank Act also provides compensation to whistleblowers who present the SEC or CFTC with information related to securities or commodities law violations that leads to a successful enforcement action. As a result of this compensation, it is possible we could face an increased number of investigations by the SEC or CFTC.We have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, as well as investigations or proceedings brought by regulatory agencies, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal or regulatory actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages, or may result in material penalties, fines or other results adverse to us.In some cases, the third-party entities that would otherwise be the primary defendants in such cases are bankrupt, in financial distress or may not honor applicable indemnification the orderly liquidation authority and other resolution regimes. For example, the Federal Reserve requires top-tier BHCs of U.S. G-SIBs, including the Firm, to maintain adequate TLAC, including equity and eligible long-term debt, in order to ensure that such institutions have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of debt to equity or otherwise by imposing losses on eligible TLAC where the SPOE strategy is used. The combined implication of the SPOE resolution strategy and the TLAC requirement is that our losses will be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on the creditors of our supported subsidiaries without requiring taxpayer or government financial support.In addition, certain jurisdictions, including the U.K. and E.U. jurisdictions, have implemented, or are in the process of implementing, changes to resolution regimes to provide resolution authorities with the ability to recapitalize a failing entity organized in such jurisdiction by writing down certain unsecured liabilities or converting certain unsecured liabilities into equity. Such “bail-in” powers are intended to enable the recapitalization of a failing institution by allocating losses to its shareholders and unsecured creditors. This may increase the overall level of capital and liquidity required by us on a consolidated basis and may result in limitations on our ability to efficiently distribute capital and liquidity among our affiliated entities, including in times of stress. Non-U.S. regulators are also considering requirements that certain subsidiaries of large financial institutions maintain minimum amounts of TLAC that would pass losses up from the subsidiaries to the Parent Company and, ultimately, to security holders of the Parent Company in the event of failure.We may be prevented from paying dividends or taking other capital actions because of regulatory constraints or revised regulatory capital requirements.We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve.In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” the orderly liquidation authority and other resolution regimes. For example, the Federal Reserve requires top-tier BHCs of U.S. G-SIBs, including the Firm, to maintain adequate TLAC, including equity and eligible long-term debt, in order to ensure that such institutions have enough loss-absorbing resources at the point of failure to be recapitalized through the conversion of debt to equity or otherwise by imposing losses on eligible TLAC where the SPOE strategy is used. The combined implication of the SPOE resolution strategy and the TLAC requirement is that our losses will be imposed on the holders of eligible long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on the creditors of our supported subsidiaries without requiring taxpayer or government financial support. In addition, certain jurisdictions, including the U.K. and E.U. jurisdictions, have implemented, or are in the process of implementing, changes to resolution regimes to provide resolution authorities with the ability to recapitalize a failing entity organized in such jurisdiction by writing down certain unsecured liabilities or converting certain unsecured liabilities into equity. Such “bail-in” powers are intended to enable the recapitalization of a failing institution by allocating losses to its shareholders and unsecured creditors. This may increase the overall level of capital and liquidity required by us on a consolidated basis and may result in limitations on our ability to efficiently distribute capital and liquidity among our affiliated entities, including in times of stress. Non-U.S. regulators are also considering requirements that certain subsidiaries of large financial institutions maintain minimum amounts of TLAC that would pass losses up from the subsidiaries to the Parent Company and, ultimately, to security holders of the Parent Company in the event of failure." }, { "status": "UNCHANGED", "current_title": "Monitoring and Control", "prior_title": "Monitoring and Control", "current_body": "The Credit Risk Management Department (“CRM”) establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels. The CRM approves extensions of credit, evaluates the creditworthiness of the counterparties and borrowers on a regular basis, and helps ensure that credit exposure is actively monitored and managed. The evaluation of counterparties and borrowers includes an assessment of the probability that an obligor will default on its financial obligations and any losses that may occur when an obligor defaults. In addition, credit risk exposure is actively managed by credit professionals and committees within the CRM and through various risk committees, whose membership includes individuals from the CRM. A comprehensive and global Credit Limits Framework is utilized to manage credit risk levels across the Firm. The Credit Limits Framework is calibrated within our risk tolerance and includes single-name limits and portfolio concentration limits by country, industry and product type. The CRM helps ensure timely and transparent communication of material credit risks, compliance with established limits and escalation of risk concentrations to appropriate senior management. The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and trading activities. The stress tests shock market factors (e.g., interest rates, commodity prices, credit spreads), risk December 2023 Form 10-K68 December 2023 Form 10-K68 December 2023 Form 10-K68 68 Table of Contents Risk Disclosures Table of Contents Risk Disclosures Table of Contents parameters (e.g., probability of default and loss given default), recovery rates and expected losses in order to assess the impact of stresses on exposures, profit and loss, and our capital position. Stress tests are conducted in accordance with our established policies and procedures.Credit EvaluationThe evaluation of corporate and institutional counterparties and borrowers includes assigning credit ratings, which reflect an assessment of an obligor’s probability of default and loss given default. Credit evaluations typically involve the assessment of financial statements; leverage; liquidity; capital strength; asset composition and quality; market capitalization; access to capital markets; adequacy of collateral, if applicable; and, in the case of certain loans, cash flow projections and debt service requirements. The CRM also evaluates strategy, market position, industry dynamics, management and other factors such as country risks and legal and contingent risks that could affect the obligor’s risk profile. Additionally, the CRM evaluates the relative position of our exposure in the borrower’s capital structure and relative recovery prospects, as well as other structural elements of the particular transaction. The underwriting of commercial real estate loans includes, but is not limited to, review of the property type, LTV ratio, occupancy levels, debt service ratio, prevailing capitalization rates and market dynamics.The evaluation of consumer borrowers is tailored to the specific type of lending. Securities-based loans are evaluated based on factors that include, but are not limited to, the amount of the loan and the amount, quality, diversification, price volatility and liquidity of the collateral. The underwriting of residential real estate loans includes, but is not limited to, review of the obligor’s debt-to-income ratio, net worth, liquidity, collateral, LTV ratio and industry standard credit-scoring models (e.g., FICO scores). Subsequent credit monitoring for individual loans is performed at the portfolio level, and collateral values are monitored on an ongoing basis.Credit risk metrics assigned to our borrowers during the evaluation process are incorporated into the CRM maintenance of the allowance for credit losses. Such allowance serves as a reserve for expected inherent losses, as well as expected losses related to loans identified as impaired. For more information on the allowance for credit losses, see Notes 2 and 9 to the financial statements.Risk MitigationWe may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets.In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 8 to the financial statements for additional information about our collateralized transactions.Loans and Lending Commitments At December 31, 2023$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,758 $11,862 $— $18,620 Secured lending facilities39,498 3,161 — 42,659 Commercial and Residential real estate8,678 209 3,331 12,218 Securities-based lending and Other2,818 — 4,402 7,220 Total Institutional Securities57,752 15,232 7,733 80,717 Wealth Management:Residential real estate60,375 22 — 60,397 Securities-based lending and Other86,423 1 — 86,424 Total Wealth Management146,798 23 — 146,821 Total Investment Management24 — 455 459 Total loans204,554 15,255 8,188 227,997 ACL(1,169)(1,169)Total loans, net of ACL$203,385 $15,255 $8,188 $226,828 Lending commitments3$149,973 Total exposure$376,801 At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $— $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 — 54,464 Securities-based lending and Other91,797 9 — 91,806 Total Wealth Management146,257 13 — 146,270 Total Investment Management24 — 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 Total exposure—consists of Total loans, net of ACL, and Lending commitments1.FVO includes the fair value of certain unfunded lending commitments.2.Investment Management business segment loans are related to certain of our activities as an investment adviser and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by parameters (e.g., probability of default and loss given default), recovery rates and expected losses in order to assess the impact of stresses on exposures, profit and loss, and our capital position. Stress tests are conducted in accordance with our established policies and procedures.Credit EvaluationThe evaluation of corporate and institutional counterparties and borrowers includes assigning credit ratings, which reflect an assessment of an obligor’s probability of default and loss given default. Credit evaluations typically involve the assessment of financial statements; leverage; liquidity; capital strength; asset composition and quality; market capitalization; access to capital markets; adequacy of collateral, if applicable; and, in the case of certain loans, cash flow projections and debt service requirements. The CRM also evaluates strategy, market position, industry dynamics, management and other factors such as country risks and legal and contingent risks that could affect the obligor’s risk profile. Additionally, the CRM evaluates the relative position of our exposure in the borrower’s capital structure and relative recovery prospects, as well as other structural elements of the particular transaction. The underwriting of commercial real estate loans includes, but is not limited to, review of the property type, LTV ratio, occupancy levels, debt service ratio, prevailing capitalization rates and market dynamics.The evaluation of consumer borrowers is tailored to the specific type of lending. Securities-based loans are evaluated based on factors that include, but are not limited to, the amount of the loan and the amount, quality, diversification, price volatility and liquidity of the collateral. The underwriting of residential real estate loans includes, but is not limited to, review of the obligor’s debt-to-income ratio, net worth, liquidity, collateral, LTV ratio and industry standard credit-scoring models (e.g., FICO scores). Subsequent credit monitoring for individual loans is performed at the portfolio level, and collateral values are monitored on an ongoing basis.Credit risk metrics assigned to our borrowers during the evaluation process are incorporated into the CRM maintenance of the allowance for credit losses. Such allowance serves as a reserve for expected inherent losses, as well as expected losses related to loans identified as impaired. For more information on the allowance for credit losses, see Notes 2 and 9 to the financial statements.Risk MitigationWe may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, parameters (e.g., probability of default and loss given default), recovery rates and expected losses in order to assess the impact of stresses on exposures, profit and loss, and our capital position. Stress tests are conducted in accordance with our established policies and procedures." }, { "status": "UNCHANGED", "current_title": "Advisor-Led Channel", "prior_title": "Advisor-led Channel", "current_body": "$ in billionsAt December 31,2023At December 31,2022Advisor-led client assets1$3,979$3,392Fee-based client assets2$1,983$1,678Fee-based client assets as apercentage of advisor-led clientassets50%49% Advisor-led client assets1 Fee-based client assets2 Fee-based client assets as a percentage of advisor-led client assets 202320222021Fee-based asset flows3$109.2$162.8$179.3 Fee-based asset flows3 1.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned. 2.Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. 3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein." }, { "status": "UNCHANGED", "current_title": "Intangible Assets", "prior_title": "Intangible Assets", "current_body": "Intangible assets are initially recorded at cost, or in the situation where acquired as part of a business combination, at the fair value determined as part of the acquisition method of accounting. Subsequently, amortizable intangible assets are carried in the balance sheet at amortized cost, where amortization is recognized over their estimated useful lives. Indefinite lived intangible assets are not amortized but are tested for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. On a quarterly basis: •All intangible assets are assessed for the presence of impairment indicators. Where such indicators are present, an evaluation for impairment is conducted. •For amortizable intangible assets, an impairment loss exists if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows. •For indefinite-lived intangible assets, an impairment exists if the carrying amount of the intangible asset exceeds its fair value. •Amortizable intangible assets are assessed for any indication that the remaining useful life or the finite life classification should be revised. In such cases, the remaining carrying amount is amortized prospectively over the revised useful life, unless it is determined that the life of the intangible asset is indefinite, in which case the intangible asset is not amortized. •Indefinite-lived intangible assets are assessed for any indication that the life of the intangible asset is no longer indefinite; in such cases, the carrying amount of the intangible asset is amortized prospectively over its remaining useful life. The initial valuation of an intangible asset as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of an impairment assessment are subjective and based, in part, on inputs that are unobservable and can be subject to uncertainty. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, customer attrition rates and discount rates.For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Unanticipated declines in our revenue generating capability, adverse market or economic events, and regulatory actions, could result in material impairment charges in future periods.See Notes 2 and 10 to the financial statements for additional information about goodwill and intangible assets.Legal and Regulatory ContingenciesIn the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution.Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital markets activities, financial products or offerings sponsored, underwritten or sold by us, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.We contest liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can The initial valuation of an intangible asset as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of an impairment assessment are subjective and based, in part, on inputs that are unobservable and can be subject to uncertainty. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, customer attrition rates and discount rates. For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Unanticipated declines in our revenue generating capability, adverse market or economic events, and regulatory actions, could result in material impairment charges in future periods. See Notes 2 and 10 to the financial statements for additional information about goodwill and intangible assets." }, { "status": "UNCHANGED", "current_title": "Financial Instruments Measured at Fair Value", "prior_title": "Financial Instruments Measured at Fair Value", "current_body": "A significant number of our financial instruments are carried at fair value. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting estimate. We make estimates regarding the valuation of assets and liabilities measured at fair value in preparing the financial statements. These assets and liabilities include, but are not limited to: •Trading assets and Trading liabilities; •Investment Securities—AFS; •Certain Securities purchased under agreements to resell; •Loans held-for-sale (measured at the lower of amortized cost or fair value); •Certain Deposits, primarily certificates of deposit; •Certain Securities sold under agreements to repurchase; •Certain Other secured financings; and •Certain Borrowings. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, we use various valuation approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable prices and inputs, and minimizes the use of unobservable prices and inputs by requiring that the relevant observable inputs be used when available. The hierarchy is broken down into three levels: wherein Level 1 represents quoted prices in active markets, Level 2 represents valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, require the greatest use of judgment. The fair values for the substantial majority of our financial assets and liabilities carried at fair value are based on observable prices and inputs and are classified in level 1 or 2, of the fair value hierarchy. Level 3 financial assets represented 1.2% and 1.4% of our total assets, as of December 31, 2023 and December 31, 2022, respectively. In periods of market disruption, the observability of prices and inputs, as well as market liquidity, may be reduced for many instruments, which could cause an instrument to be recategorized from Level 1 to Level 2 or from Level 2 to Level 3. In addition, a downturn in market conditions could lead to declines in the valuation of many instruments carried at fair value. Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. For further information on the definition of fair value, Level 1, Level 2, Level 3 and related valuation techniques, and quantitative information about and sensitivity of significant unobservable inputs used in Level 3 fair value measurements, see Notes 2 and 4 to the financial statements.Where appropriate, valuation adjustments are made to account for various factors, such as liquidity risk (bid-ask adjustments), credit quality, model uncertainty, concentration risk and funding, in order to arrive at fair value. For a further discussion of valuation adjustments that we apply, see Note 2 to the financial statements.Goodwill and Intangible AssetsGoodwillWe test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill.For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case, the quantitative test would be performed.When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, hierarchy. Level 3 financial assets represented 1.2% and 1.4% of our total assets, as of December 31, 2023 and December 31, 2022, respectively. In periods of market disruption, the observability of prices and inputs, as well as market liquidity, may be reduced for many instruments, which could cause an instrument to be recategorized from Level 1 to Level 2 or from Level 2 to Level 3. In addition, a downturn in market conditions could lead to declines in the valuation of many instruments carried at fair value. Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. For further information on the definition of fair value, Level 1, Level 2, Level 3 and related valuation techniques, and quantitative information about and sensitivity of significant unobservable inputs used in Level 3 fair value measurements, see Notes 2 and 4 to the financial statements. Where appropriate, valuation adjustments are made to account for various factors, such as liquidity risk (bid-ask adjustments), credit quality, model uncertainty, concentration risk and funding, in order to arrive at fair value. For a further discussion of valuation adjustments that we apply, see Note 2 to the financial statements." }, { "status": "UNCHANGED", "current_title": "Institutional Securities—Other Net Revenues", "prior_title": "Institutional Securities—Other Net Revenues", "current_body": "Other net revenues include impacts from certain treasury functions, such as liquidity and funding costs and gains and losses on economic hedges related to certain borrowings. Other net revenues also include mark-to-market gains and losses on held-for-sale corporate loans and lending commitments, as well as net interest and gain and losses on economic hedges associated with held-for-sale and held-for-investment corporate loans and lending commitments. Also included are gains and losses from financial instruments used to economically hedge compensation expense related to certain DCP, income and losses from the equity method investment related to our Japanese securities joint venture with MUFG, as well as Investments and Other revenues that are not directly attributable to Fixed income and Equities businesses." }, { "status": "UNCHANGED", "current_title": "Credit Risk", "prior_title": "Credit Risk", "current_body": "Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. For more information on how we monitor and manage credit risk, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.”" }, { "status": "UNCHANGED", "current_title": "We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third parties (or third parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.", "prior_title": "We are subject to operational risks, including a failure, breach or other disruption of our operations or security systems or those of our third-parties (or third-parties thereof), as well as human error or malfeasance, which could adversely affect our businesses or reputation.", "current_body": "Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. We may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, or integration of processes or systems of acquired companies, resulting in new operational risk that we may not fully appreciate or identify. The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and systems at technology centers maintained by unaffiliated third parties to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our IT systems or external technology that allows our clients and customers to use our products and services (including our self-directed brokerage platform) could harm our business and our reputation. As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes, or due to fraud or cyberattack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearinghouses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third party’s systems (or third parties thereof), processes or information assets, or improper or unauthorized action by third parties, including consultants and subcontractors or our employees, we have received in the past and may receive in the future regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses or damage to our reputation. In addition, the interconnectivity of multiple financial institutions with central agents, exchanges and clearinghouses, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industrywide operational failure that could materially impact our ability to conduct business. Furthermore, the concentration of Firm and personal information held by a small number of third parties increases the risk that a breach or disruption at a key third party may cause an industrywide event that could significantly increase the cost and risk of conducting business. These risks may be heightened to the extent that we rely on third parties that are concentrated in a geographic area.There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities where we are located. This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, floods, hurricanes and wildfires); electrical outages; environmental hazards; computer servers; communication platforms or other services we use; new technologies (such as generative artificial intelligence); and our employees or third parties with whom we conduct business. Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business.Notwithstanding evolving technology and technology-based risk and control systems, our businesses ultimately rely on people, including our employees and those of third parties with whom we conduct business. As a result of human error or engagement in violations of applicable policies, laws, rules or procedures, certain errors or violations are not always discovered immediately by our technological processes or by As a major participant in the global capital markets, we face the risk of incorrect valuation or risk management of our trading positions due to flaws in data, models, electronic trading systems or processes, or due to fraud or cyberattack. We also face the risk of operational failure or disruption of any of the clearing agents, exchanges, clearinghouses or other financial intermediaries we use to facilitate our lending, securities and derivatives transactions. In addition, in the event of a breakdown or improper operation or disposal of our or a direct or indirect third party’s systems (or third parties thereof), processes or information assets, or improper or unauthorized action by third parties, including consultants and subcontractors or our employees, we have received in the past and may receive in the future regulatory sanctions, and could suffer financial loss, an impairment to our liquidity position, a disruption of our businesses or damage to our reputation. In addition, the interconnectivity of multiple financial institutions with central agents, exchanges and clearinghouses, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industrywide operational failure that could materially impact our ability to conduct business. Furthermore, the concentration of Firm and personal information held by a small number of third parties increases the risk that a breach or disruption at a key third party may cause an industrywide event that could significantly increase the cost and risk of conducting business. These risks may be heightened to the extent that we rely on third parties that are concentrated in a geographic area. There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities where we are located. This may include a disruption involving physical site access; software flaws and vulnerabilities; cybersecurity incidents; terrorist activities; political unrest; disease pandemics; catastrophic events; climate-related incidents and natural disasters (such as earthquakes, tornadoes, floods, hurricanes and wildfires); electrical outages; environmental hazards; computer servers; communication platforms or other services we use; new technologies (such as generative artificial intelligence); and our employees or third parties with whom we conduct business. Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business. Notwithstanding evolving technology and technology-based risk and control systems, our businesses ultimately rely on people, including our employees and those of third parties with whom we conduct business. As a result of human error or engagement in violations of applicable policies, laws, rules or procedures, certain errors or violations are not always discovered immediately by our technological processes or by 15December 2023 Form 10-K 15December 2023 Form 10-K 15December 2023 Form 10-K 15 Table of Contents Table of Contents Table of Contents our controls and other procedures that are intended to prevent and detect such errors or violations. These can include calculation or input errors, inadvertent or duplicate payments, mistakes in addressing emails or other communications, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Our use of new technologies may be undermined by such human errors or misconduct due to undetected flaws or biases in the algorithms or data utilized by such technologies. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us, and negatively impact our reputation in the future.We conduct business in various jurisdictions outside the U.S., including jurisdictions that may not have comparable levels of protection for their corporate assets, such as intellectual property, trademarks, trade secrets, know-how, and customer information and records. The protection afforded in those jurisdictions may be less established and/or predictable than in the U.S. or other jurisdictions in which we operate. As a result, there may also be heightened risks associated with the potential theft of their data, technology and intellectual property in those jurisdictions by domestic or foreign actors, including private parties and those affiliated with or controlled by state actors. Additionally, we are subject to complex and evolving U.S. and international laws and regulations governing cybersecurity, privacy and data governance, transfer and protection, which may differ and potentially conflict, in various jurisdictions. Any theft of data, technology or intellectual property may negatively impact our operations and reputation, including disrupting the business activities of our subsidiaries, affiliates, joint ventures or clients conducting business in those jurisdictions.A cyberattack, information or security breach or a technology failure of ours or a third party could adversely affect our ability to conduct our business or manage our exposure to risk, or result in disclosure or misuse of personal, confidential or proprietary information and otherwise adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies; the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions; and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, state-sponsored actors and other parties. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors or other third parties or users of our systems to disclose sensitive information in order to gain access to our networks, systems or data or those of our employees or clients, and such parties may see their effectiveness enhanced by the use of artificial intelligence. Global events and geopolitical instability have also led to increased nation-state targeting of financial institutions in the U.S. and abroad. Information security risks may also derive from human error, fraud or malice on the part of our employees or third parties, software bugs, server malfunctions, software or hardware failure or other technological failure. For example, human error has led to the loss of the Firm's physical data-bearing devices in the past. These risks may be heightened by several factors, including remote work, reliance on new technologies (such as generative artificial intelligence) or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third parties with whom we do business or share information, and each of their service providers, our regulators and the third parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity and information security risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyberattacks are complex, frequently change and are difficult to anticipate. Like other financial services firms, the Firm, its third-party providers and its clients continue to be the subject of unauthorized access attacks; mishandling, loss, theft or misuse of information; computer viruses or malware; cyberattacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or networks or cause other damage; ransomware; denial of service attacks; data breaches; social engineering attacks; phishing attacks; and other events. There can be no assurance that such unauthorized access, mishandling or misuse of information, or cybersecurity incidents will not occur in the future and they could occur more frequently and on a more significant scale.We maintain a significant amount of personal and confidential information on our customers, clients and certain counterparties that we are required to protect under various state, federal and international data protection and privacy laws. These laws may be in conflict with one another or courts and regulators may interpret them in ways that we had not anticipated or that adversely affect our business. A cyberattack, information or security breach, or a technology failure of ours or of a third party could jeopardize our or our clients’, employees’, partners’, vendors’ or counterparties’ personal, confidential, proprietary or other information processed and stored in, and transmitted through, our and our third parties’ computer systems and networks. Furthermore, such events could cause interruptions or malfunctions in our, our clients’, employees’, partners’, vendors’, counterparties’ or third parties’ operations, as well as the unauthorized release, gathering, monitoring, misuse, loss or destruction of personal, confidential, proprietary and other information of ours, our employees, our customers or of other third parties. Any of these events could result in reputational damage with our controls and other procedures that are intended to prevent and detect such errors or violations. These can include calculation or input errors, inadvertent or duplicate payments, mistakes in addressing emails or other communications, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Our use of new technologies may be undermined by such human errors or misconduct due to undetected flaws or biases in the algorithms or data utilized by such technologies. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us, and negatively impact our reputation in the future.We conduct business in various jurisdictions outside the U.S., including jurisdictions that may not have comparable levels of protection for their corporate assets, such as intellectual property, trademarks, trade secrets, know-how, and customer information and records. The protection afforded in those jurisdictions may be less established and/or predictable than in the U.S. or other jurisdictions in which we operate. As a result, there may also be heightened risks associated with the potential theft of their data, technology and intellectual property in those jurisdictions by domestic or foreign actors, including private parties and those affiliated with or controlled by state actors. Additionally, we are subject to complex and evolving U.S. and international laws and regulations governing cybersecurity, privacy and data governance, transfer and protection, which may differ and potentially conflict, in various jurisdictions. Any theft of data, technology or intellectual property may negatively impact our operations and reputation, including disrupting the business activities of our subsidiaries, affiliates, joint ventures or clients conducting business in those jurisdictions.A cyberattack, information or security breach or a technology failure of ours or a third party could adversely affect our ability to conduct our business or manage our exposure to risk, or result in disclosure or misuse of personal, confidential or proprietary information and otherwise adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies; the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions; and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, state-sponsored actors and other parties. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors or other third parties or users of our systems to disclose sensitive information in order to gain access to our networks, systems or data or those of our employees or clients, and such parties may see their effectiveness enhanced by the use of artificial intelligence. Global events and geopolitical instability have also led to our controls and other procedures that are intended to prevent and detect such errors or violations. These can include calculation or input errors, inadvertent or duplicate payments, mistakes in addressing emails or other communications, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Our use of new technologies may be undermined by such human errors or misconduct due to undetected flaws or biases in the algorithms or data utilized by such technologies. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us, and negatively impact our reputation in the future. We conduct business in various jurisdictions outside the U.S., including jurisdictions that may not have comparable levels of protection for their corporate assets, such as intellectual property, trademarks, trade secrets, know-how, and customer information and records. The protection afforded in those jurisdictions may be less established and/or predictable than in the U.S. or other jurisdictions in which we operate. As a result, there may also be heightened risks associated with the potential theft of their data, technology and intellectual property in those jurisdictions by domestic or foreign actors, including private parties and those affiliated with or controlled by state actors. Additionally, we are subject to complex and evolving U.S. and international laws and regulations governing cybersecurity, privacy and data governance, transfer and protection, which may differ and potentially conflict, in various jurisdictions. Any theft of data, technology or intellectual property may negatively impact our operations and reputation, including disrupting the business activities of our subsidiaries, affiliates, joint ventures or clients conducting business in those jurisdictions." }, { "status": "UNCHANGED", "current_title": "Institutional Securities Loans2", "prior_title": "Institutional Securities Loans2", "current_body": "Deposits4 1.Amounts exclude transactions between the bank subsidiaries, as well as deposits from the Parent Company and affiliates. 2.For a further discussion of loans in the Wealth Management and Institutional Securities business segments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. 3.Other loans primarily include tailored lending. For a further discussion of Other loans, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. 4.For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Balance Sheet—Unsecured Financing” herein. Other MattersDeferred Cash-Based CompensationThe Firm sponsors a number of deferred cash-based compensation programs for current and former employees, which generally contain vesting, clawback and cancellation provisions. Employees are permitted to allocate the value of their deferred awards among a menu of notional investments, whereby the value of their awards will track the performance of the referenced notional investments. The menu of investments, which is selected by the Firm, includes fixed income, equity, commodity and money market funds.Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. At December 31, 2023 and December 31, 2022, substantially all employee referenced investments that subjected the Firm to price risk were economically hedged.Amounts Recognized in Compensation Expense$ in millions202320222021Deferred cash-based awards$693 $761 $810 Return on referenced investments668 (716)526 Total recognized in compensation expense$1,361 $45 $1,336 Amounts Recognized in Compensation Expense by Segment$ in millions202320222021Institutional Securities$162 $(97)$372 Wealth Management984 11 798 Investment Management 215 131 166 Total recognized in compensation expense$1,361 $45 $1,336" }, { "status": "UNCHANGED", "current_title": "Risk Committee of the Board", "prior_title": "Risk Committee of the Board", "current_body": "The BRC assists the Board in its oversight of the ERM framework; oversees significant financial risk exposures of the Firm, including market, credit, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures; oversees our risk appetite statement, including risk tolerance levels and limits; reviews capital, liquidity and funding strategy and planning and related guidelines and policies; reviews the contingency funding plan and capital planning process; oversees our significant risk governance, risk management and risk assessment guidelines and policies; oversees the performance of the Chief Risk Officer; reviews reports from our Strategic Transactions Committee, CCAR Committee and RRP Committee; reviews significant new product risk, emerging risks, regulatory matters and climate risk; and reviews reports from the Chief Audit Officer regarding the results of reviews and assessments of the risk management, liquidity and capital functions. The BRC reports to the Board on a regular basis and coordinates with the Board and other Board committees with respect to oversight of risk management and risk assessment guidelines." }, { "status": "UNCHANGED", "current_title": "We are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.", "prior_title": "We are subject to numerous political, economic, legal, tax, operational, franchise and other risks as a result of our international operations that could adversely impact our businesses in many ways.", "current_body": "We are subject to numerous political, economic, legal, tax, operational, franchise and other risks that are inherent in operating in many countries, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls, increased taxes and levies, minimum global tax regimes, cybersecurity, data transfer and outsourcing restrictions, regulatory scrutiny regarding the use of new technologies, prohibitions on certain types of foreign and capital market activities, limitations on cross-border listings and other restrictive governmental actions, as well as the outbreak of hostilities or political and governmental instability, including tensions between China and the U.S., the expansion or escalation of hostilities between Russia and Ukraine or in the Middle East or the initiation or escalation of hostilities or terrorist activity around the world and the potential associated impacts on global and local economies and our operations. In many countries, the laws and regulations applicable to the securities and financial services industries and multinational corporations are uncertain, evolving and subject to sudden change or may be inconsistent with U.S. law. It may also be difficult for us to determine the exact requirements of local laws in every market or adapt to changes in law, which could adversely impact our businesses. Our inability to remain in compliance with local laws in a particular market could have a significant and negative effect not only on our business in that market but also on our reputation generally. We are also subject to the risk that transactions we structure might not be legally enforceable in all cases. Various emerging market countries have experienced severe political, economic or financial disruptions, including significant devaluations of their currencies, defaults or potential defaults on sovereign debt, capital and currency exchange controls, high rates of inflation and low or negative growth rates in their economies. Crime and corruption, as well as issues of security and personal safety, also exist in certain of these countries. These conditions could adversely impact our businesses and increase volatility in financial markets generally.A disease pandemic, such as COVID-19 and its variants, or other widespread health emergencies, natural disasters, climate-related incidents, terrorist activities or military actions, or social or political tensions, could create economic and financial disruptions in emerging markets or in other areas of the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations and supply chain complications, that could impair our ability to manage or conduct our businesses around the world.As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by OFAC and similar multinational bodies and governmental agencies worldwide, which may be inconsistent with local law. We and certain of our subsidiaries are also subject to applicable AML and/or anti-corruption laws in the U.S., as well as in the jurisdictions in which we operate, including the Bank Secrecy Act, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. A violation of a sanction, embargo program, AML or anti-corruption law could subject us, and individual employees, to a regulatory enforcement action, as well as significant civil and criminal penalties.Acquisition, Divestiture and Joint Venture RiskWe may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances, and certain acquisitions may subject our business to new or increased risk.In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with Mitsubishi UFJ Financial Group, Inc. (“MUFG”)), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because Various emerging market countries have experienced severe political, economic or financial disruptions, including significant devaluations of their currencies, defaults or potential defaults on sovereign debt, capital and currency exchange controls, high rates of inflation and low or negative growth rates in their economies. Crime and corruption, as well as issues of security and personal safety, also exist in certain of these countries. These conditions could adversely impact our businesses and increase volatility in financial markets generally. A disease pandemic, such as COVID-19 and its variants, or other widespread health emergencies, natural disasters, climate-related incidents, terrorist activities or military actions, or social or political tensions, could create economic and financial disruptions in emerging markets or in other areas of the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations and supply chain complications, that could impair our ability to manage or conduct our businesses around the world. As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by OFAC and similar multinational bodies and governmental agencies worldwide, which may be inconsistent with local law. We and certain of our subsidiaries are also subject to applicable AML and/or anti-corruption laws in the U.S., as well as in the jurisdictions in which we operate, including the Bank Secrecy Act, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. A violation of a sanction, embargo program, AML or anti-corruption law could subject us, and individual employees, to a regulatory enforcement action, as well as significant civil and criminal penalties." } ] }