UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant to
Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported):
January
20, 2009
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State Street Corporation
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(Exact name of registrant as specified in its charter)
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Massachusetts
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001-07511
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04-2456637
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(State of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification Number)
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One Lincoln Street, Boston, Massachusetts
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02111
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(Address
of principal executive offices)
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(Zip
code)
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Registrant's telephone number, including area code:
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(617) 786-3000
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Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On January 20, 2009, State Street Corporation issued a news release
announcing its results of operations and related financial information
for the fourth quarter and year ended December 31, 2008. A copy of that
news release is furnished herewith as Exhibit 99.1, and is incorporated
herein by reference.
In addition, copies of slide presentations pertaining to (a) the State
Street-sponsored asset-backed commercial paper conduit program as of
December 31, 2008 and (b) State Street’s investment portfolio as of
December 31, 2008, each of which will be referenced in connection with
the investor conference call to be held by State Street on January 20,
2009, are furnished with this Form 8-K as Exhibits 99.2 and 99.3,
respectively.
The information in this Item 2.02, and in Exhibits 99.1, 99.2 and 99.3
attached to this Form 8-K, shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, nor shall this Item
2.02, such Exhibits 99.1, 99.2 and 99.3 or any of the information
contained therein be deemed incorporated by reference in any filing
under the Securities Exchange Act of 1934 or the Securities Act of 1933,
except as shall be expressly set forth by specific reference in such
filing.
Item 8.01. Other Events.
This Form 8-K is being filed for the purpose of amending our risk
factors disclosures. Unless otherwise indicated or unless the context
requires otherwise, all references in this Form 8-K to “State Street,”
“we,” “us,” “our,” or similar terms means State Street Corporation and
its subsidiaries on a consolidated basis.
We are amending the risk factors disclosures we filed on a Form 8-K on
January 16, 2009 to, among other things, correct the following
information: the aggregate net asset value of the unregistered cash
collateral pools underlying our securities lending program (based on a
constant net asset value of $1.00) on December 31, 2007, September 30,
2008 and December 31, 2008 was $194 billion, $167 billion and $122
billion, respectively, and the average weighted net asset value of the
unregistered cash collateral pools based upon market value of the pools’
portfolio holdings (determined using pricing from third-party pricing
sources) at December 31, 2008 was $0.939. The risk factors disclosures,
as amended, follow:
Risk Factors
This Form 8-K and other reports filed by us under the Securities
Exchange Act of 1934 or registration statements under the Securities Act
of 1933 contain statements that are considered “forward-looking
statements” within the meaning of United States securities laws. In
addition, State Street and its management may make other written or oral
communications from time to time that contain forward-looking
statements. Forward-looking statements, including statements about
industry trends, management’s future expectations and other matters that
do not relate strictly to historical facts, are based on assumptions by
management, and are often identified by such forward-looking terminology
as “expect,” “look,” “believe,” “anticipate,” “estimate,” “seek,” “may,”
“will,” “trend,” “target” and “goal,” or similar statements or
variations of such terms. Forward-looking statements may include, among
other things, statements about State Street’s confidence in its
strategies and its expectations about financial performance, market
growth, acquisitions and divestitures, new technologies, services and
opportunities and earnings.
Forward-looking statements are subject to various risks and
uncertainties, which change over time, are based on management’s
expectations and assumptions at the time the statements are made, and
are not guarantees of future results. Management’s expectations and
assumptions, and the continued validity of the forward-looking
statements, are subject to change due to a broad range of factors
affecting the national and global economies, the equity, debt, currency
and other financial markets, as well as factors specific to State Street
and its subsidiaries, including State Street Bank. Factors that could
cause changes in the expectations or assumptions on which
forward-looking statements are based include, but are not limited to:
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global financial market disruptions and the current worldwide economic
recession, and monetary and other governmental actions designed to
address such disruptions and recession in the United States and
internationally;
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the financial strength of the counterparties with which we or our
clients do business and with which we have investment or financial
exposure;
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the liquidity of the U.S. and international securities markets,
particularly the markets for fixed-income securities, and the
liquidity requirements of our customers;
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the credit quality and credit agency ratings of the securities in our
investment securities portfolio, a deterioration or downgrade of which
could lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss;
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the maintenance of credit agency ratings for our debt obligations as
well as the level of credibility of credit agency ratings;
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the possibility that changes to accounting rules or in market
conditions or asset performance may require any off-balance sheet
activities, including the unconsolidated asset-backed commercial paper
conduits we administer, to be consolidated into our financial
statements, requiring the recognition of associated losses;
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the possibility of our customers incurring substantial losses in
investment pools where we act as agent, and the possibility of further
general reductions in the valuation of assets;
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our ability to attract deposits and other low-cost, short-term funding;
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potential changes to the competitive environment, including changes
due to the effects of consolidation, extensive and changing government
regulation and perceptions of State Street as a suitable service
provider or counterparty;
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the level and volatility of interest rates and the performance and
volatility of securities, credit, currency and other markets in the
United States and internationally;
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our ability to measure the fair value of securities in our investment
securities portfolio and in the asset-backed commercial paper conduits
we sponsor;
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the results of litigation and similar disputes and, in particular, the
effect of current or potential litigation concerning SSgA’s active
fixed-income strategies, and the enactment of legislation and changes
in regulation and enforcement that impact us and our customers, as
well as the effects of legal and regulatory proceedings;
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adverse publicity or other reputational harm;
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our ability to pursue acquisitions, strategic alliances and
divestures, finance future business acquisitions and obtain regulatory
approvals and consents for acquisitions;
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the performance and demand for the products and services we offer,
including the level and timing of withdrawals from our collective
investment products;
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our ability to continue to grow revenue, attract highly skilled
people, control expenses and attract the capital necessary to achieve
our business goals and comply with regulatory requirements;
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our ability to control operating risks, information technology systems
risks and outsourcing risks, the possibility of errors in the
quantitative models we use to manage our business and the possibility
that our controls will fail or be circumvented;
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the potential for new products and services to impose additional costs
on us and expose us to increased operational risk, and our ability to
protect our intellectual property rights;
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our ability to obtain quality and timely services from third parties
with which we contract;
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changes in accounting standards and practices, including changes in
the interpretation of existing standards, that impact our consolidated
financial statements; and
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changes in tax legislation and in the interpretation of existing tax
laws by U.S. and non-U.S. tax authorities that impact the amount of
taxes due.
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Therefore, actual outcomes and results may differ materially from what
is expressed in our forward-looking statements and from our historical
financial results due to the factors discussed above, below and
elsewhere in this Form 8-K or disclosed in our other Securities and
Exchange Commission, or “SEC,” filings. Forward-looking statements
should not be relied upon as representing our expectations or beliefs as
of any date subsequent to the date this Form 8-K is filed with the SEC.
State Street undertakes no obligation to revise the forward-looking
statements contained in this Form 8-K to reflect events after the date
it is filed with the SEC. The factors discussed above are not intended
to be a complete summary of all risks and uncertainties that may affect
our businesses. We cannot anticipate all potential economic, operational
and financial developments that may adversely impact our operations and
our financial results.
Forward-looking statements should not be viewed as predictions, and
should not be the primary basis upon which investors evaluate State
Street. Any investor in State Street should consider all risks and
uncertainties disclosed in our SEC filings, including our filings under
the Securities Exchange Act of 1934, including our reports on Form 10-K,
Form 10-Q and Form 8-K, or registration statements under the
Securities Act of 1933, all of which are accessible on the SEC’s website
at
www.sec.gov
or on our website at
www.statestreet.com
.
The following is a discussion of risk factors applicable to State Street.
Global financial market disruptions during 2007 and 2008 have
increased the uncertainty and unpredictability we face in managing our
business, and continued or additional disruptions in 2009 could have an
adverse effect on our business, our results of operations and our
financial condition.
Since mid-2007, global credit and other financial markets have suffered
substantial volatility, illiquidity and disruption. In the second half
of 2008, these factors resulted in the bankruptcy or acquisition of, or
significant government assistance to, a number of major domestic and
international financial institutions, some of which were significant
counterparties with us. These events, and the potential for increased
and continuing disruptions, have significantly diminished overall
confidence in the financial markets and in financial institutions, have
further exacerbated liquidity and pricing issues within the fixed-income
markets, have increased the uncertainty and unpredictability we face in
managing our business and have had an adverse effect on our business,
our results of operations and our financial condition. The continuation
of current disruptions or the occurrence of additional disruptions in
the global markets could have an adverse effect on our business, our
results of operations and our financial condition.
The current worldwide economic recession is likely to adversely
affect our business and our results of operations.
Our business is affected by global economic conditions, including
regional and international rates of economic growth and the impact that
such economic conditions have on the financial markets. Recent downturns
in the U.S. and global economy have led to an increased level of
commercial and consumer delinquencies, lack of consumer confidence,
decreased market valuations and liquidity, increased market volatility
and a widespread reduction of business activity generally. The resulting
economic pressure and lack of confidence in the financial markets may
adversely affect our business, our financial condition and our results
of operations, as well as the business of our customers. A worsening of
economic conditions in the U.S. or globally would likely exacerbate the
adverse effects of these difficult conditions on us and on the financial
services industry in general.
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The failure or instability of any of our significant
counterparties, many of whom are financial institutions, could expose us
to loss.
The financial markets are characterized by extensive interconnections
among financial institutions, including banks, broker-dealers,
collective investment funds and insurance companies. As a result of
these interconnections we and many of our customers have concentrated
counterparty exposure to other financial institutions. This
concentration presents significant risks to us and to our customers
because the failure or perceived weakness of any of our counterparties
(or in some cases of our customers’ counterparties) has the potential to
expose us to risk of loss. The current instability of the financial
markets has resulted in many financial institutions becoming
significantly less creditworthy, and as a result we are exposed to
increased counterparty risks, both as principal and in our capacity as
agent for our customers. Changes in market perception of the financial
strength of particular financial institutions can occur rapidly, is
often based upon a variety of factors and is difficult to predict. In
addition, as U.S. and non-U.S. governments have addressed the financial
crisis in an evolving manner, the criteria for and manner of
governmental support of financial institutions and other economically
important sectors remain uncertain. If a significant individual
counterparty defaults on an obligation to us, we could incur financial
losses that materially adversely affect our business, our financial
condition and our results of operations.
Although our entire business is subject to these interconnections,
several of our lines of business are particularly sensitive to them,
including Treasury operations, currency and other trading, securities
lending and investment management. Given the limited number of strong
counterparties in the current market, we are not able to mitigate all of
our and our customers’ counterparty credit risk. The current
consolidation of financial service firms that began in 2008, and which
we believe is likely to continue in 2009, and the failures of other
financial institutions have increased the concentration of our
counterparty risk.
In the normal course of business we assume significant credit and
counterparty risk, and even when we hold collateral against this risk,
we may incur a loss in the event of a default.
Our focus on large institutional investors and their businesses requires
that we assume secured and unsecured credit and counterparty risk, both
on- and off-balance sheet, in a variety of forms. We may experience
significant intra- and inter-day credit exposure through
settlement-related or redemption-related extensions of credit. The
degree of the demand for such overdraft credit tends to increase during
periods of market turbulence. For example, investors in collective
investment vehicles for which we act as custodian may engage in
significant redemption activity due to adverse market or economic news
that was not anticipated by the fund’s manager. Our relationship with
our customers, the nature of the settlement process and our systems may
limit our ability to decline to extend short-term credit in such
circumstances. For some types of customers, we provide credit to allow
them to leverage their portfolios, which increases our potential loss if
the customer experiences credit difficulties. From time to time, we may
assume concentrated credit risk at the individual obligor, counterparty
or guarantor level. In addition, we may from time to time be exposed to
concentrated credit risk at the industry or country level, potentially
exposing us to a single market or political event or a correlated set of
events.
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We are also generally not able to net exposures across counterparties
that are affiliated entities and may not be able in all circumstances to
net exposures across multiple products to the same legal entity. As a
consequence, we may incur a loss in relation to one entity or product
even though our exposure to one of its affiliates or across product
types is over-collateralized. Moreover, not all of our counterparty
exposure is secured, and when our exposure is secured, the realizable
market value of the collateral may be less at the time we exercise
rights against that collateral than the value of the secured
obligations. This risk may be particularly acute if we are required to
sell the collateral into an illiquid or temporarily impaired market.
See, for example,
“—We are exposed to the risk of losses as a result
of certain customer relationships with Lehman Brothers.”
In
some cases, we have indemnified customers against a shortfall in the
value of collateral that secures certain repurchase obligations of third
parties to such customers.
In addition, our customers often purchase securities or other financial
instruments from a broker-dealer under repurchase arrangements,
frequently as a method of reinvesting the cash collateral they receive
from lending their securities. Under these arrangements, the
broker-dealer is obligated to repurchase these securities or financial
instruments from the customer at the same price at some point in the
future. The anticipated value of the collateral is intended to exceed
the broker-dealer’s repayment obligation. In certain cases, we agree to
indemnify our customers from any loss that would arise upon a default by
the counterparty if the proceeds from the disposition of the securities
or other financial assets is less than the amount of the repayment
obligation by the customer’s counterparty. In those instances, we,
rather than our customer, are exposed to the risks associated with
counterparty default and collateral value.
We are exposed to the risk of losses as a result of certain
customer relationships with Lehman Brothers.
We had indemnification obligations with respect to customer repurchase
agreements with Lehman. In the case of some of our customers that
entered into repurchase agreements with a U.S. based Lehman affiliate,
we indemnified obligations totaling $1 billion and, following the
bankruptcy of Lehman, paid this amount to our customers. Upon such
payments, we took possession of the collateral, consisting of commercial
real estate obligations, that was subject to our customers’ repurchase
agreements with Lehman. Based upon our assessment of the likely proceeds
to be received from the disposition or maturity of this collateral in
light of the then current market environment, during the third quarter
of 2008, we established a reserve of $200 million to cover the
difference between the estimated fair value of the collateral at the
time and the payment we made to our customers. As with other assets in
our investment portfolio, we continue to evaluate the value of the
collateral. Upon further evaluation or changes in market conditions, we
may incur additional charges, if the value of the collateral
deteriorates. In addition, upon disposition or maturity of the
collateral, the loss incurred may be greater than $200 million.
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In addition to the foregoing repurchase agreements, certain customers
had entered into repurchase agreements with Lehman’s United Kingdom
affiliate. We have repaid those customers and taken possession of the
related collateral; however, we believe that the proceeds from the
disposition or maturity of the collateral will be at least equal to the
amount we paid to such customers and, consequently, have not established
a reserve related to those agreements. It is possible that we will incur
losses relating to these agreements in the future.
We appointed Lehman as sub-custodian or prime broker for some of our
custody customers and some investment funds managed by State Street
Global Advisors, or SSgA. For custody customers, we made this
appointment at their direction. In the case of investment funds managed
by SSgA, we appointed Lehman in our capacity as manager of those funds.
As of September 15, 2008, the date Lehman was placed in administration,
our custody customers had claims against Lehman of approximately $325
million, and our investment funds had claims against Lehman of
approximately $312 million, both in connection with Lehman’s role as a
sub-custodian or prime broker. Estimating the actual amount or timing of
any recovery on our clients’ and funds’ claims against Lehman is
currently not possible. While we believe that we acted appropriately in
appointing Lehman as a sub-custodian and a prime-broker, some customers
have requested that we compensate them for their losses. Any agreement
to compensate any of these customers could adversely affect our
financial condition and results of operations.
If all or a significant portion of the unrealized losses in our
portfolio of investment securities were determined to be
other-than-temporarily impaired, we would recognize a material charge to
our earnings and our capital ratios would be adversely impacted.
As of December 31, 2008, there were $5.45 billion of after-tax net
unrealized losses associated with our portfolio of investment securities
available for sale and held to maturity that were recorded in other
comprehensive income in consolidated shareholders’ equity. In addition
to these unrealized losses, there were $870 million of after-tax
unrealized losses associated with securities held to maturity that were
not required under GAAP to be recorded in other comprehensive income.
Generally, the fair value of such securities is based upon market values
supplied by third-party sources. Market values for the securities in our
portfolio declined significantly during 2008 as liquidity and pricing
generally in the capital markets was disrupted. When the fair value of a
security declines, management must assess whether that decline is
“other-than-temporary.” See
“—We must apply significant
judgment to assign fair values to our assets, and we may not be able to
obtain these values, or any value, if these assets were sold.”
When management reviews whether a decline in fair value is
other-than-temporary, it considers numerous factors, many of which
involve significant judgment. As 2008 progressed, rating agencies
imposed an increasing number of downgrades and credit watches on the
securities in our investment portfolio, which contributed to the decline
in market values. Any continued increase in downgrades and credit
watches may contribute to a further decline in market values. More
generally, market conditions continue to be volatile, and we can provide
no assurance that the amount of the unrealized losses will not increase.
To the extent that any portion of the unrealized losses in our portfolio
of investment securities is determined to be other-than-temporarily
impaired, we will recognize a charge to our earnings in the quarter
during which such determination is made and our capital ratios will be
adversely impacted. In the fourth quarter of 2008, we recognized a $78
million charge to earnings as a result of other-than-temporary
impairment determinations. If any such charge is significant, a rating
agency might downgrade our credit rating or put us on credit watch. A
downgrade or a significant reduction in our capital ratios might
adversely impact our ability to access the capital markets or might
increase our cost of capital. Even if we do not determine that the
unrealized losses associated with the investment portfolio require an
impairment charge, increases in such unrealized losses adversely impact
our tangible common equity ratio, which may adversely impact credit
rating agency and investor sentiment towards us. Such negative
perception also may adversely impact our ability to access the capital
markets or might increase our cost of capital.
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Our business activities, including the unconsolidated asset-backed
commercial paper conduits we administer, expose us to liquidity and
interest-rate risk.
In our business activities, we assume liquidity and interest-rate risk
in our investment portfolio of longer- and intermediate-term assets,
which is funded in large part by our customer deposit base. We may be
exposed to liquidity or other risks in managing asset pools for third
parties that are funded on a short-term basis, or where the customers
participating in these products have a right to the return of cash or
assets on limited notice. These business activities include, among
others, the unconsolidated asset-backed commercial paper conduits that
we administer, securities finance collateral pools and money market and
other short-term investment funds.
In the asset-backed commercial paper conduits, for example, pools of
medium- and long-term financial instruments, principally mortgage- and
other asset-backed securities, are financed through the issuance of
short-term commercial paper. The conduits strive to maintain a positive
margin between the rate of return on their longer-term assets and the
short-term cost of funding. This mismatch in the maturity of the
investment pools and funding creates risk if disruptions occur in the
liquidity of the short-term debt or asset-backed securities markets, or
if the cost of short-term borrowings exceeds the conduits’ rate of
return on their investment pools or purchased assets.
In connection with our administration of the asset-backed commercial
paper conduits, we provide contractual back-up liquidity to the
conduits. If the conduits cannot issue sufficient commercial paper to
meet their ongoing liquidity needs, we are required by contract to,
among other things, provide liquidity to the conduits by purchasing
portfolio assets from them. If required, these portfolio assets are
purchased at prices determined in accordance with contractual terms of
the applicable liquidity asset purchase agreement, which may exceed
their fair value. We may also provide liquidity to the conduits by
purchasing commercial paper from them or by providing other extensions
of credit to the conduits. Our asset-backed commercial paper conduit
program experienced significantly reduced demand for its commercial
paper financing beginning in the third quarter of 2007. As the
disruption in the credit markets continued through 2008, our liquidity
management of the conduits resulted in our purchasing historically high
levels of commercial paper from the conduits. During 2008, the amount of
commercial paper issued by the conduits on our consolidated balance
sheet increased from approximately $2 million as of December 31, 2007 to
approximately $292 million as of March 31, 2008, approximately $212
million as of June 30, 2008, and approximately $7.82 billion as of
September 30, 2008 (including $1.6 billion under the AMLF program). On
December 31, 2008, we held $230 million of commercial paper issued by
the conduits on our consolidated balance sheet (which does not include
$5.7 billion issued by the conduits under the Federal Reserve’s
Commercial Paper Funding Facility as of December 31, 2008). The highest
total overnight position (including AMLF) in the conduits’ commercial
paper held by State Street during the three months ended December 31,
2008, was approximately $8.9 billion and during the fiscal year ended
December 31, 2008, was approximately $9.2 billion. The average total
overnight position (including AMLF) for the same periods was
approximately $5.48 billion for the quarter ended December 31, 2008 and
$2.3 billion for the fiscal year ended December 31, 2008. As noted
above, as of December 31, 2008, the conduits had utilized the Federal
Reserve’s Commercial Paper Funding Facility to issue $5.7 billion of
commercial paper. The Commercial Paper Funding Facility is currently
scheduled to expire for new issuances on April 30, 2009. We may be
required to provide additional back-up liquidity if the conduits are
unable to place their commercial paper in the market after the
Commercial Paper Funding Facility expires. Our contractual arrangements
with the conduits also require us to purchase conduit portfolio assets
under other circumstances, such as a downgrade of the credit rating of
securities held by the conduits. Purchase of the assets of the conduits
pursuant to the contractual agreements described above could affect the
size of our consolidated balance sheet and related funding requirements,
our capital ratios, and, if the conduit assets include unrealized
losses, could require us to recognize those losses. As of December 31,
2008, there were $3.6 billion of after-tax net unrealized losses
associated with portfolio holdings of the conduits. Because of our
contractual agreements to purchase assets from the conduits under
specified conditions, we are also exposed to the credit risks in the
conduits’ portfolios.
- 8 -
If for any reason we were to consolidate the unconsolidated
asset-backed commercial paper conduits that we administer onto our
consolidated balance sheet, our funding requirements and capital ratios
would be adversely affected and we may record significant unrealized
losses.
The unconsolidated asset-backed commercial paper conduits we administer
are not recorded in our consolidated financial statements. If
circumstances change, we may be required under existing accounting
standards to consolidate some or all of the otherwise unconsolidated
conduits onto our consolidated balance sheet. One factor taken into
consideration in evaluating whether we are required to consolidate the
conduits under existing accounting standards is whether we or third
parties are exposed to the majority of the “expected losses” (as defined
in the accounting literature) associated with certain risks in the
conduits’ business. Investors not affiliated with us have purchased from
the conduits notes commonly referred to as “first-loss notes” that bear
loss, up to the principal amount of the notes, before any loss would be
allocated to us. We use financial models to determine whether the
expected losses from the conduits are greater or less than the principal
amount of the first-loss notes. If changes in market conditions require
us to update the assumptions in our expected loss model, such that we
conclude that we absorb greater than 50% of the expected losses, we may
be required to consolidate one or more of the conduits unless the amount
of first-loss notes is increased. As of December 31, 2008, these
conduits had an aggregate of $67 million of first-loss notes outstanding
compared to $32 million at December 31, 2007. In various circumstances,
including if the conduits are not able to issue additional first-loss
notes, we may be deemed to be the primary beneficiary of the conduits,
and we would be required to consolidate the conduits’ assets and
liabilities onto our consolidated balance sheet. Moreover, current
market conditions have increased the difficulty we face in predicting
any such future losses. For example, certain assets of the conduits are
entitled to credit support from monoline insurance companies. Our loss
analysis depends on our ability to judge whether these insurance
companies will continue to perform their credit support obligations.
- 9 -
It is also possible that changes to applicable accounting standards will
be adopted that require us to consolidate the conduits. The Financial
Accounting Standards Board is considering changes to accounting
standards related to off-balance sheet vehicles such as the conduits and
industry-wide revisions are under discussion that, if adopted in the
form currently under consideration, would require us to consolidate on
January 1, 2010, all of the conduits we administer. Alternatively,
existing accounting standards may be interpreted differently in the
future in a manner that increases the risk of consolidation of the
conduits. Consolidation would adversely affect the size of our
consolidated balance sheet and related funding requirements, adversely
affect our capital ratios and require us to recognize the conduits’
unrealized losses in the conduit assets resulting from the difference
between the book value and the market value of the conduits’ portfolios.
As of December 31, 2008, there were $3.56 billion of after-tax net
unrealized losses associated with portfolio holdings of the conduits.
We must apply significant judgment to assign fair values to our
assets, and we may not be able to obtain these values, or any value, if
these assets were sold.
As of December 31, 2008, approximately 39% of our consolidated total
assets and approximately 8% of our consolidated total liabilities were
carried at fair value. Accounting standards require us to categorize
these assets and liabilities according to a fair value valuation
hierarchy. Approximately 33% of our assets and approximately 8% of our
liabilities are categorized in level 2 of the valuation hierarchy
(meaning that their fair value was determined by reference to quoted
prices for similar assets or liabilities or other observable inputs) or
level 3 (meaning that their fair value was determined by reference to
inputs that are unobservable in the market and therefore require a
greater degree of management judgment). The determination of fair value
for securities categorized in level 2 or 3 involves significant judgment
due to the complexity of factors contributing to the valuation, many of
which are not readily observable in the market. The current market
disruptions make valuation even more difficult and subjective. In
addition, we have historically placed a high level of reliance on
information obtained from third-party sources to measure fair values.
Third-party sources also use assumptions, judgments and estimates in
determining securities values, and different third parties use different
methodologies or provide different prices for securities. In addition,
the nature of the market participant that is valuing the securities at
any given time could impact the valuation of the securities. For
example, investment banks, such as the underwriters of our public
offerings, may value our securities differently than securities pricing
providers. Moreover, depending upon, among other things, the measurement
date of the security, the subsequent sale price of the security may be
different from its recorded fair value. These differences may be
significant, especially if the security is sold during a period of
illiquidity or market disruption or as part of a large block of
securities under a forced transaction.
Adverse conditions in the economy or financial markets may
simultaneously trigger adverse events affecting multiple aspects of our
business.
Adverse economic or financial market conditions could simultaneously
adversely affect several aspects of our business. For example,
conditions in the financial markets that might require us to purchase
assets from the conduits pursuant to the liquidity asset purchase
agreements or result in the consolidation of the conduits and
recognition of the conduits’ unrealized losses may at the same time also
require us to recognize other-than-temporary impairment in our portfolio
of investment securities. If multiple aspects of our business are
simultaneously impacted by economic or financial market conditions or
other events, the demands on our liquidity may exceed our resources.
- 10 -
We may need to raise additional capital in the future, which may
not be available to us or may only be available on unfavorable terms.
As a result of continued disruption in the financial markets or other
developments having an adverse effect on our capital ratios, we may need
to raise additional capital in order to maintain our credit ratings or
for other purposes. However, our ability to access the capital markets,
if needed, will depend on a number of factors, including the state of
the financial markets. Accordingly, we cannot assure you of our ability
to raise additional capital, if needed, on terms acceptable to us.
If our custody customers experience high levels of redemption
requests from their investors, or if high volumes in the securities
markets disrupt normal settlements, we may provide significant and
unanticipated overdraft availability, exposing us to risk of loss.
We provide custody and related services for mutual funds and other
collective investment vehicles managed by unaffiliated managers.
Generally, these affiliated and unaffiliated collective investment pools
offer investors liquidity on a daily basis or with notice periods of a
month or less. During periods of disruption in the financial markets,
failures in the settlement process tend to increase, and investor demand
for liquidity from these investment pools can be extremely high relative
to normal cash levels maintained by those funds. In such circumstances,
we may, but generally are not required to, provide short-term extensions
of credit. For example, during the second half of 2008, we funded higher
than normal levels of overdrafts by unaffiliated mutual funds and other
collective investment vehicles, with particular liquidity requirements
by money market funds. The provision of such overdraft availability may
affect the size of our consolidated balance sheet, which, in the absence
of additional capital, could adversely affect our capital ratios. In
addition, if these overdrafts are substantial relative to the net assets
of the investment pool, we may be subject to the risk that the
investment pool is unable to liquidate assets to pay down the overdraft
or that a decline in the value of the investment pool’s assets may
result in the fund not having sufficient assets to satisfy its
obligation to repay the overdrafts, exposing us to risk of loss.
Our reputation and business prospects may be damaged if our
customers incur substantial losses in investment pools where we act as
agent.
Our management of collective investment pools on behalf of customers
exposes us to reputational risk. The incurrence by our customers of
substantial losses in these pools, particularly in money market funds
(where there is a general market expectation that net asset value will
not drop below $1.00 per share), in situations where we make
distributions in-kind to satisfy redemption requests or in circumstances
where one of our investment strategies significantly underperforms the
market or our competitors’ products, could result in significant harm to
our reputation and significantly and adversely affect the prospects of
our associated business units. Because we often implement investment and
operational decisions and actions over multiple investment pools to
achieve scale, we face increased risk that losses, even small losses,
may have a significant effect in the aggregate.
- 11 -
In some very limited circumstances, and consistent with applicable
regulatory requirements, we may compensate investment pools for all or a
portion of the pool’s losses even though we are not statutorily or
contractually obligated to do so. For example, during the fourth quarter
of 2008, we elected to provide support to stable value accounts managed
by SSgA. These accounts, offered to retirement plans, allow participants
to purchase and redeem units at a constant net asset value regardless of
volatility in the underlying value of the assets held by the account.
The accounts enter into contractual arrangements with third-party
financial institutions that agree to make up any shortfall in the
account if all the units are redeemed at the constant net asset value.
These financial institutions have the right, under certain
circumstances, to terminate this guarantee with respect to future
investments in the account. During 2008, the liquidity and pricing
issues in the fixed-income markets adversely impacted the market value
of the securities in these accounts to the point that the third-party
guarantors considered terminating their financial guarantees with the
accounts.
Although we were not statutorily or contractually obligated to do so, we
elected to purchase approximately $2.5 billion of securities from these
accounts that had been identified as presenting increased risk in the
current market environment and to contribute an aggregate of $450
million to the accounts to improve the ratio of the market value of the
accounts’ portfolio holdings to the book value of the accounts. This
resulted in a fourth quarter net charge of $450 million. In addition, in
January 2008, we contributed $160 million to the accounts. Any future
decision by us to provide financial support to our investment pools
would potentially result in the recognition of significant losses and
could in certain situations require us to consolidate the investment
pools onto our consolidated balance sheet. A failure or inability to
provide such support could damage our reputation among current and
prospective customers. Any termination by a third-party guarantor of its
guarantee could, if we were unable to replace the guarantee, adversely
affect our business or result in litigation.
We may be exposed to customer claims, financial loss, reputational
damage and regulatory scrutiny as a result of transacting purchases and
redemptions relating to the unregistered cash collateral pools
underlying our securities lending program at a net asset value of $1.00
per unit rather than a lower net asset value based upon market value of
the underlying portfolios.
A portion of the cash collateral received by customers under our
securities lending program is invested in cash collateral pools that we
manage. Interests in these cash collateral pools are held by
unaffiliated customers and by registered and unregistered investment
funds that we manage. Our cash collateral pools that are money market
funds registered under the Investment Company Act are required to
maintain, and have maintained, a constant net asset value of $1.00 per
unit. The remainder of our cash collateral pools are bank collective
investment funds that are not required to be registered under the
Investment Company Act. These unregistered cash collateral pools seek,
but are not required, to maintain, and transact purchases and
redemptions at, a constant net asset value of $1.00 per unit. At
December 31, 2007, September 30, 2008 and December 31, 2008, the
aggregate net asset value of these unregistered cash collateral pools
(based on a constant net asset value of $1.00) was approximately $194
billion, $167 billion and $122 billion, respectively.
- 12 -
Throughout 2008 and currently, these unregistered cash collateral pools
have continued to transact purchases and redemptions at a constant net
asset value of $1.00 per unit even though the market value of the
unregistered cash collateral pools’ portfolio holdings, determined using
pricing from third-party pricing sources, has been below $1.00 per unit.
At December 31, 2008, the net asset value based upon market value of our
unregistered cash collateral pools ranged from $0.908 to $1.00, with the
average weighted net asset value on such date being $0.939. A
substantial portion of the decline in the market value of these assets
occurred in the fourth quarter of 2008. We believe that our practice of
continuing to transact at $1.00 per unit at the unregistered cash
collateral pools, notwithstanding the underlying portfolios having a
market value of less than $1.00 per unit, is consistent with the
practices of other securities lending agents and in compliance with the
terms of our unregistered cash collateral pools. We have continued this
practice for a number of reasons, including that none of the securities
in the cash collateral pools is currently in default or considered by
the pools to be impaired, that there are restrictions on withdrawals
from the collective investment funds and that the cash collateral pools
have adequate sources of liquidity from normal lending activity under
the securities lending program as a cash collateral pool without the
need to sell securities whose value has been adversely impacted by the
lack of liquidity in the fixed income markets. If we continue to
transact purchases and redemptions from the unregistered cash collateral
pools based upon a constant $1.00 per unit net asset value and the
liquid assets of these pools turn out to be insufficient to support
redemption activity at such value or the pools suffer material defaults
on their underlying portfolio holdings, investors in the unregistered
cash collateral pools may seek to hold us responsible for any shortfall
due to prior redemptions at a value above the market value of the
underlying portfolio or as a result of any such portfolio defaults.
Moreover, a broad range of unregistered collective investment pools that
State Street Global Advisors manages, referred to as lending funds,
participate in our securities lending program and as a result hold
interests in the unregistered cash collateral pools discussed above. As
a participant in these unregistered cash collateral pools, these lending
funds may have the same claims as other clients discussed above. In
addition, we have valued, for purpose of determining the net asset value
of the lending funds, the units in the unregistered cash collateral
pools at $1.00 per unit. If it were to be determined that the historical
valuation of these units at $1.00 was not appropriate, or if we are
required in the future to calculate the net asset value of the lending
funds and calculate purchase and redemption prices of units of the
lending funds based upon a value of less than $1.00 for units of the
unregistered cash collateral pools that the lending fund holds, the net
asset value of the lending funds may also be adversely affected and
lending fund investors may claim that they overpaid for their investment
and seek to hold us responsible for their related investment loss. If we
continue to transact purchases and redemptions of units of the
unregistered cash collateral pools at a net asset value that reflects a
valuation of $1.00 per unit such potential exposure would likely
increase over time. Since the percentage of a lending fund’s assets on
loan varies based on the fund’s investment focus and with changes in
market demand, the impact of this issue on the net asset value of the
lending fund will vary significantly, but in some cases may be material.
In such circumstances, our reputation as an asset manager and the
marketability of these lending funds may be adversely affected and
participants in our lending funds may seek to be compensated for any
loss they incurred or allege to have incurred resulting from either a
change in the reported net asset value of the collective investment pool
or previous redemption and subscription activity in the collateral pools
at the constant net asset value of $1.00 per unit.
- 13 -
Any claims asserted by investors in the unregistered cash collateral
pools or our lending funds may be substantial, may entail litigation and
may result in regulatory scrutiny of our securities lending program.
Our plan to reduce operating costs and support long-term growth
may not achieve its intended objectives.
During the fourth quarter of 2008, we recorded a $306 million charge in
connection with a restructuring plan. The plan is intended to reduce our
operating costs, including through global workforce reductions that are
expected to be substantially completed by the end of the first quarter
of 2009, in order to support our long-term growth while aligning the
organization to meet the challenges and opportunities presented by the
current market environment. Risks associated with implementing our
restructuring plan and other workforce management issues may impair our
ability to achieve anticipated operating cost reductions or may
otherwise harm our business. We may also experience delays in
implementing the plan. To the extent we make changes to the plan, we may
incur additional charges.
If we are unable to continuously attract deposits and other
short-term funding, our consolidated financial condition, including our
capital ratios, our results of operations and our business prospects
could be harmed.
Liquidity management is critical to the management of our consolidated
balance sheet and to our ability to service our customer base. We
generally use our sources of funds to:
-
extend credit to our customers in connection with our custody business;
-
meet demands for return of funds on deposit by customers; and
-
manage the pool of intermediate- and longer-term assets that comprise
our investment portfolio.
Because the demand for credit by our customers is difficult to forecast
and control, and may be at its peak at times of disruption in the
securities markets, and because the average maturity of our investment
portfolio is significantly longer than the contractual maturity of our
deposit base, we need to continuously attract, and are dependent upon,
access to various sources of short-term funding.
In managing our liquidity, our primary source of short-term funding is
customer deposits, which are predominantly transaction-based deposits by
institutional investors. Our ability to continue to attract these
deposits, and other short-term funding sources such as certificates of
deposit and commercial paper, is subject to variability based upon a
number of factors, including volume and volatility in the global
securities markets, the relative interest rates that we are prepared to
pay for these liabilities and the perception of safety of those deposits
or short-term obligations relative to alternative short-term investments
available to our customers, including in the capital markets. For
example, the disruption in the global fixed-income securities markets,
which began in the third quarter of 2007 and continued throughout 2008,
had a substantially greater impact upon liquidity and valuations in
those markets than has historically been experienced. In addition,
liquidity in the inter-bank market, as well as the markets for
commercial paper, certificates of deposit and other short term
instruments, significantly contracted during 2008. The availability and
cost of credit in short-term markets is highly dependent upon the
markets’ perception of our liquidity and creditworthiness. Our efforts
to monitor and manage liquidity risk may not be successful or sufficient
to deal with dramatic or unanticipated changes in the global securities
markets or other event-driven reductions in liquidity. In such events,
our cost of funds may increase, thereby reducing our net interest
revenue, or we may need to dispose of a portion of our investment
portfolio, which, depending upon market conditions, could result in our
realizing a loss or experiencing other adverse consequences, including
adverse accounting consequences.
- 14 -
If we are unable to successfully invest customer deposits our
business may be adversely affected.
During the recent market disruptions, we experienced substantial inflows
of liquid assets, particularly customer deposits, as short-term deposits
with us in a disrupted market became more attractive relative to other
short-term investment options. However, the contraction in the number of
counterparties for which we had a favorable credit assessment made it
difficult to invest, even on an overnight basis, all of our available
liquidity, which adversely impacted the rate of return that we earned on
these assets. As a result of this contraction of counterparties during
the recent market disruptions, we have frequently placed deposits with
government central banks, resulting in a minimal rate of return. If we
continue to face difficulty investing these assets, our ability to
attract customer deposits may be harmed, which would in turn harm our
business and our results of operations.
Any downgrades in our credit ratings could adversely affect our
borrowing costs, capital costs and liquidity and cause reputational harm.
Various rating agencies publish credit ratings for our debt obligations
based on their evaluation of a number of factors, some of which relate
to our performance and other corporate developments, including
financings, acquisitions and joint ventures, and some of which relate to
general industry conditions. We anticipate that the rating agencies will
review our ratings based on our results for the fourth quarter and
developments in our business. We cannot assure you that we will continue
to maintain our current ratings. The current market environment and
exposure to other financial institution counterparties increases the
risk that we may not maintain our current ratings. Downgrades in our
credit ratings may adversely affect our borrowing costs, our capital
costs and our ability to raise capital and, in turn, our liquidity. A
failure to maintain an acceptable credit rating may also preclude us
from being competitive in certain products, may be negatively perceived
by our customers or counterparties or may have other adverse
reputational effects.
- 15 -
An actual or perceived reduction in our financial strength may
cause others to reduce or cease doing business with us.
Our counterparties, as well as our customers, rely upon our financial
strength and stability and evaluate the risks of doing business with us.
If we experience diminished financial strength or stability, actual or
perceived, including due to market or regulatory developments, our
announced or rumored business developments or results of operations, a
decline in our stock price or a reduced credit rating, our
counterparties may become less willing to enter into transactions,
secured or unsecured, with us, our customers may reduce or place limits
upon the level of services we provide them or seek other service
providers and our prospective customers may select other service
providers. The risk that we may be perceived as less creditworthy
relative to other market participants is increased in the current market
environment, where the consolidation of financial institutions,
including major global financial institutions, is resulting in a smaller
number of much larger counterparties and competitors. If our
counterparties perceive us to be a less viable counterparty, our ability
to enter into financial transactions on terms acceptable to us or our
customers, on our or our customers’ behalf, will be materially
compromised. If our customers reduce their deposits with us or select
other service providers for all or a portion of the services we provide
them, our net interest and fee revenues will decrease accordingly.
Our businesses may be negatively affected by adverse publicity or
other reputational harm.
Our relationship with many of our customers is predicated upon our
reputation as a fiduciary and a service provider that adheres to the
highest standards of ethics, service quality and regulatory compliance.
Adverse publicity, regulatory actions, litigation, operational failures,
the failure to meet customer expectations and other issues could
materially and adversely affect our reputation, our ability to attract
and retain customers or our sources of funding. Preserving and enhancing
our reputation also depends on maintaining systems and procedures that
address known risks and regulatory requirements, as well as our ability
to identify and mitigate additional risks that arise due to changes in
our businesses and the marketplaces in which we operate, the regulatory
environment and customer expectations. If any of these developments has
a material effect on our reputation, our business will suffer.
Governmental responses to recent market disruptions may be
inadequate and may have unintended consequences.
In response to recent market disruptions, legislators and financial
regulators have taken a number of steps to stabilize the financial
markets. These steps included the Emergency Economic Stabilization Act
of 2008, the provision of other direct and indirect assistance to
distressed financial institutions, assistance by the banking authorities
in arranging acquisitions of weakened banks and broker-dealers,
implementation of programs by the Federal Reserve to provide liquidity
to the commercial paper markets and temporary prohibitions on short
sales of certain financial institution securities. The overall effects
of these and other legislative and regulatory efforts on the financial
markets and whether the new administration and Congress will pursue
similar strategies are uncertain, and they may not have the intended
stabilization effects. In addition to these actions in the U.S., other
governments have taken regulatory and other steps to support financial
institutions, to guarantee deposits and to seek to stabilize the
financial markets. Should these or other legislative or regulatory
initiatives fail to stabilize the financial markets, our business,
financial condition, results of operations and prospects could be
materially and adversely affected.
- 16 -
In addition, while these measures have been taken to support the
markets, they may have unintended consequences on the global financial
system or our businesses, including reducing competition, increasing the
general level of uncertainty in the markets or favoring certain
institutions or depositors. We may need to modify our strategies,
businesses or operations, and we may incur increased capital
requirements and constraints or additional costs in order to satisfy new
regulatory requirements or to compete in a changed business environment.
Our participation in the U.S. Treasury’s TARP capital purchase
program restricts our ability to increase dividends on our common stock,
undertake stock repurchase programs and compensate our key executives.
In October 2008, the U.S. Treasury invested $2 billion in State Street
pursuant to the TARP capital purchase program. The terms of the TARP
capital purchase program require us to pay preferred cumulative
dividends to Treasury and restrict our ability to increase dividends on
our common stock, redeem Treasury’s investment without receiving
high-quality replacement capital, undertake stock repurchase programs
and pay executive compensation. Additional restrictions may be imposed
by Treasury or Congress on us at a later date, and these restrictions
may apply to us retroactively. These restrictions may have a material
adverse affect on our operations, revenue and financial condition, on
our ability to pay dividends, or on our ability to attract and retain
executive talent.
Government-imposed limitations on short sales and investor
decisions to reduce short selling may harm our securities finance
revenues.
Government-imposed prohibitions and restrictions on short sales of
securities, designed to address perceived market abuses, negatively
impacted the value of securities on loan during 2008. Although many of
these restrictions have expired, continued reductions in the overall
volume of short sales likely would decrease our securities finance
revenues. In addition, media and regulatory focus on short selling, and
losses incurred in securities finance programs sponsored by other
financial institutions, have caused some institutional investors to
reduce or eliminate their securities finance programs. Continued
investor avoidance of short sales or renewed regulatory prohibitions on
short sales would affect our business model and the demand for our
services, and both our revenue from securities finance operations and
the liquidity and market value of the collateral pools in which our
customers invest may be adversely affected.
Because our fee income is based in part on the value of assets
under custody or management, our business could be adversely affected by
further declines in asset values.
The significant declines in equity and other financial markets globally
during 2008 have adversely affected and are likely to continue to
adversely affect our fee revenue, which is based in part upon the value
of assets under custody, administration or management. Further
deterioration or a continuation of recent market conditions is likely to
lead to a continued decline in the value of assets under custody,
administration or management, which would reduce our asset-based fee
revenue and may adversely affect other transaction-based revenue, such
as securities finance revenue, and the volume of transactions that we
execute for our customers. Many of the costs of providing our services
are relatively fixed. Therefore, any such decline in revenue would have
a disproportionate effect on our earnings.
- 17 -
The illiquidity and volatility of global fixed-income and equity
markets has affected our ability to effectively and profitably manage
our investment pools and may make our products less attractive to
customers.
We manage assets on behalf of customers in several forms, including in
collective investment pools, including money market funds, securities
finance collateral pools, cash collateral and other cash products and
short-term investment funds. In addition to the impact on the market
value of customer portfolios, the illiquidity and volatility of both the
global fixed-income and equity markets have negatively affected our
ability to manage customer inflows and outflows from our pooled
investment vehicles. Within our asset management business, we manage
investment pools, such as mutual funds and collective investment funds,
that generally offer our customers the ability to withdraw their
investments on short notice, generally daily or monthly. This requires
that we manage those pools in a manner that takes into account both
maximizing the long-term return on the investment pool and retaining
sufficient liquidity to meet reasonably anticipated liquidity
requirements of our customers. During the 2008 market disruptions, the
liquidity in many asset classes, particularly short- and long-term
fixed-income securities, declined dramatically, and providing liquidity
to meet all customer demands in these investment pools without adversely
impacting the return to non-withdrawing customers became more difficult.
For customers that invest directly or indirectly in certain of the
collateral pools and seek to terminate participation in lending
programs, we have required, in accordance with the applicable customer
arrangements, that these withdrawals from the collateral pools take the
form of partial in-kind distributions of securities. Although we are
entitled to make distributions in-kind, customers have in some cases
sought, and may in the future seek, reimbursement for any loss that they
incur in connection with the disposition of such securities. If these
higher than normal demands for liquidity from our customers continue or
increase, it could become more difficult to manage the liquidity
requirements of our collective investment pools and, as a result, we may
elect (or in some situations be required) to support the liquidity of
these pools. If the liquidity in the fixed-income markets were to
deteriorate further or remain disrupted for a prolonged period, our
relationship with our customers may be adversely affected, levels of
redemption activity could increase and our results of operations and
business prospects could be adversely impacted.
In addition, if a money market fund that we manage were to have
unexpected liquidity demands from investors in the fund that exceeded
available liquidity, the fund could be required to sell assets to meet
those redemption requirements, and it may then be difficult to sell the
assets held by the fund at a reasonable price, if at all.
Alternatively, although we have no such arrangements currently in place,
we have in the past, and may in the future, guarantee liquidity to
investors desiring to make withdrawals from a fund, and a significant
amount of such guarantees could adversely affect our own liquidity and
financial condition. Because of the size of the investment pools that we
manage, we may not have the financial ability or regulatory authority to
support the liquidity demands of our customers. The extreme volatility
in the equity markets has led to potential for the return on passive and
quantitative products deviating from their target return. The temporary
closures of securities exchanges in certain markets, such as occurred in
Brazil and Russia in the second half of 2008, or artificial floors such
as the one implemented in Pakistan, create a risk that customer
redemptions in pooled investment vehicles may result in significant
tracking error and underperformance relative to stated benchmarks. Any
failure of the pools to meet redemption requests or to underperform
relative to similar products offered by our competitors could harm our
business and our reputation.
- 18 -
We are subject to intense competition in all aspects of our
business, which could negatively affect our ability to maintain or
increase our profitability.
The markets in which we operate across all facets of our business are
both highly competitive and global. We have experienced, and anticipate
that we will continue to experience, pricing pressure in many of our
core businesses. Many of our businesses compete with other domestic and
international banks and financial services companies, such as custody
banks, investment advisors, broker-dealers, outsourcing companies and
data processing companies. Ongoing consolidation within the financial
services industry could pose challenges in the markets we serve,
including potentially increased downward pricing pressure across our
businesses. Many of our competitors, including our competitors in core
services, have substantially greater capital resources than we do. In
some of our businesses, we are service providers to significant
competitors. These competitors are in some instances significant
customers, and the retention of these customers involves additional
risks, such as the avoidance of actual or perceived conflicts of
interest and the maintenance of high levels of service quality. The
ability of a competitor to offer comparable or improved products or
services at a lower price would likely negatively affect our ability to
maintain or increase our profitability. Many of our core services are
subject to contracts that have relatively short terms or may be
terminated by our customer after a short notice period. In addition,
pricing pressures as a result of the activities of competitors, customer
pricing reviews, and rebids, as well as the introduction of new
products, may result in a reduction in the prices we can charge for our
products and services.
If we fail to attract new customers and cross-sell additional
products and services to our existing customers, our prospects for
growth may be harmed.
Our strategy for growth depends upon both attracting new customers and
cross-selling additional products and services to our existing customer
base. To the extent that we are not able to achieve these goals, we may
not be able to meet our financial goals. In addition, our proactive
cross-selling of multiple products and services to our customers can
exacerbate the negative financial effects associated with the risk of
loss of any one customer.
Development of new products and services may impose additional
costs on us and may expose us to increased operational risk.
Our financial performance depends, in part, on our ability to develop
and market new and innovative services and to adopt or develop new
technologies that differentiate our products or provide cost
efficiencies, while avoiding increased related expenses. The
introduction of new products and services can entail significant time
and resources. Substantial risks and uncertainties are associated with
the introduction of new products and services, including technical and
control requirements that may need to be developed and implemented,
rapid technological change in the industry, our ability to access
technical and other information from our customers and the significant
and ongoing investments required to bring new products and services to
market in a timely manner at competitive prices. Regulatory and internal
control requirements, capital requirements, competitive alternatives and
shifting market preferences may also determine if such initiatives can
be brought to market in a manner that is timely and attractive to our
customers. Failure to manage successfully these risks in the development
and implementation of new products or services could have a material
adverse effect on our business, as well as our results of operations and
financial condition.
- 19 -
It may be difficult and costly to protect our intellectual
property rights, and we may not be able to ensure their protection.
We may be unable to protect our intellectual property and proprietary
technology effectively, which may allow competitors to duplicate our
technology and products and may adversely affect our ability to compete
with them. To the extent that we are not able to protect our
intellectual property effectively through patents or other means,
employees with knowledge of our intellectual property may leave and seek
to exploit our intellectual property for their own or others’ advantage.
In addition, we may infringe upon claims of third-party patents, and we
may face intellectual property challenges from other parties. We may not
be successful in defending against any such challenges or in obtaining
licenses to avoid or resolve any intellectual property disputes. The
intellectual property of an acquired business, such as that of Currenex,
Inc. acquired in 2007, may be an important component of the value that
we agree to pay for such a business. However, such acquisitions are
subject to the risks that the acquired business may not own the
intellectual property that we believe we are acquiring, that the
intellectual property is dependent upon licenses from third parties,
that the acquired business infringes upon the intellectual property
rights of others, or that the technology does not have the acceptance in
the marketplace that we anticipated.
We may be unable to increase the portion of our management fee
revenue that is generated from enhanced index and actively managed
products, and the investment performance of these products may result in
a reduction in the fees that we earn.
Over the past several years, we have sought to increase the portion of
our management fee revenue generated from enhanced index and actively
managed products, with respect to which we generally receive fees at
higher rates compared to passive products. We may not be able to
continue to increase this segment of our business at a rate that is
consistent with our business and financial goals. The amount of assets
we are able to attract and retain in active strategies depends on the
performance of such products relative to competitive products in the
institutional marketplace. For example, our active fixed-income business
continues to be adversely impacted by underperformance in certain
fixed-income strategies that occurred in 2007. In addition, with respect
to certain of our enhanced index and actively managed products, we have
entered into performance fee arrangements, where the management fee
revenue we earn is based on the performance of managed funds against
specified benchmarks. The reliance on performance fees increases the
potential volatility of our management fee revenue. If investment
performance in our asset management business fails to meet either
benchmarks or the performance of our competitors, we could experience a
decline in assets under management and a reduction in the fees that we
earn, irrespective of economic or market conditions.
- 20 -
Our business is subject to risks from foreign exchange movements.
The degree of volatility in foreign exchange rates can affect our
foreign exchange trading revenue. In general, increased currency
volatility may increase our market risk, and our foreign exchange
revenue, all other things being equal, is likely to decrease during
times of decreased currency volatility. In addition, as our business
grows globally, our exposure to changes in foreign currency exchange
rates could affect our levels of revenue, expense and earnings, as well
as the value of our investment in our non-U.S. operations.
Our revenues and profits are sensitive to changes in interest
rates.
Our financial performance could be negatively affected by changes in
interest rates as they impact our asset and liability management
activities. The levels of interest rates in global markets, changes in
the relationship between short-and long-term interest rates, the
direction and speed of interest-rate changes, and the asset and
liability spreads relative to the currency and geographic mix of our
interest-earning assets and interest-bearing liabilities, affect our net
interest revenue. Our ability to anticipate these changes or to hedge
the related exposures on and off our consolidated balance sheet can
significantly influence the success of our asset and liability
management activities and the resulting level of our net interest
revenue. The impact of changes in interest rates will depend on the
relative durations of assets and liabilities in accordance with their
relevant currencies. In general, sustained lower interest rates, a flat
or inverted yield curve and narrow interest-rate spreads have a
constraining effect on our net interest revenue.
Acquisitions, strategic alliances and divestures pose risks for
our business.
Acquisitions of complementary businesses and technologies, development
of strategic alliances and divestitures of portions of our business, in
addition to fostering organic growth opportunities, are an active part
of our overall business strategy to remain competitive. The integration
of acquisitions presents risks that differ from the risks associated
with our ongoing operations. Our financial results would be
significantly harmed by an inability to achieve the cost savings and
other benefits that we anticipated in valuing an acquired business. We
may not be able effectively to assimilate services, technologies, key
personnel or businesses of acquired companies into our business or
service offerings, alliances may not be successful, and we may not
achieve related revenue growth or cost savings. We also face the risk of
being unable to retain the customer bases of acquired companies or
unable to cross-sell our products and services to its customers.
Acquisitions of investment servicing businesses entail information
technology systems conversions, which involve operational risks and may
result in customer dissatisfaction and defection. Customers of asset
servicing businesses that we have acquired may be competitors of our
non-custody businesses. The loss of some of these customers or a
significant reduction in revenues generated from them, for competitive
or other reasons, would adversely affect the benefits that we expect to
achieve from these acquisitions. In addition, we may not be able to
successfully manage the divestiture of identified businesses on
satisfactory terms, if at all, which would reduce any anticipated
benefits to earnings.
- 21 -
With any acquisition, the integration of the operations and resources of
the businesses could result in the loss of key employees, the disruption
of our and the acquired company’s ongoing businesses, or inconsistencies
in standards, controls, procedures and policies that could adversely
affect our ability to maintain relationships with customers and
employees or to achieve the anticipated benefits of the acquisition.
Integration efforts may also divert management attention and resources.
The acquisition and combination of a business with our operations may
also expose us to risks from unknown or contingent liabilities with
respect to which we may have no recourse against the seller. Acquisition
transactions are often competitive auctions in which we have limited
time and access to information to evaluate the risks inherent in the
business being acquired, and no or limited recourse against the seller
if undisclosed liabilities are discovered after we enter into a
definitive agreement.
We may not achieve the benefits we sought in an acquisition, or, if
achieved, those benefits may be achieved later than we anticipated.
Failure to achieve anticipated benefits from an acquisition could result
in increased costs and lower revenues than expected of the combined
company. In addition, if the financial performance associated with an
acquisition falls short of expectations, it may result in impairment
charges associated with the goodwill or other intangible assets recorded
as part of the acquisition.
Unavailability of financing may make future business acquisitions
or dispositions difficult.
Our ability to make acquisitions in order to achieve greater economies
of scale or to expand our product offering is dependent upon our
financial resources and our ability to access the capital markets. In
addition, our ability to dispose of businesses that no longer fit our
business model may be difficult if attractive financing is not available
to prospective buyers. Due to company-specific issues or lack of
liquidity in the capital markets, our ability to continue to expand
through acquisitions or to dispose of businesses that no longer are
strategic to us may be adversely affected.
We face significant regulatory hurdles when planning business
acquisitions.
In connection with most acquisitions, before the acquisition can be
completed, we must obtain various regulatory approvals or consents,
which may include approvals of the Federal Reserve Board, the
Massachusetts Commissioner of Banks and other domestic and foreign
regulatory authorities. These regulatory authorities may impose
conditions on the completion of the acquisition or require changes to
its terms. Any such conditions, or any associated regulatory delays,
could limit the benefits of the transaction.
Competition for our employees is intense, and we may not be able
to attract and retain the highly skilled people we need to support our
business.
Our success depends, in large part, on our ability to attract and retain
key people. Competition for the best people in most activities in which
we engage can be intense, and we may not be able to hire people or
retain them. The unexpected loss of services of one or more of our key
personnel could have a material adverse impact on our business because
of their skills, their knowledge of our markets, their years of industry
experience and, in some cases, the difficulty of promptly finding
qualified replacement personnel. Similarly, the loss of key employees,
either individually or as a group, can adversely impact customer
perception of our ability to continue to manage certain types of
investment management mandates. In some of our businesses, we have
experienced significant employee turnover, which increases costs,
requires additional training and increases the potential for operational
errors.
- 22 -
Long-term fixed-price contracts expose us to pricing and
performance risk.
We enter into long-term fixed-price contracts to provide middle office
or investment manager and hedge fund manager operations outsourcing
services to customers, including services related but not limited to
certain trading activities, cash reporting, settlement and
reconciliation activities, collateral management and information
technology development. The long-term contracts for these relationships
require considerable up-front investment by us, including technology and
conversion costs, and carry the risk that pricing for the products and
services we provide might not prove adequate to generate expected
operating margins over the term of the contracts. Profitability of these
contracts is largely a function of our ability to accurately calculate
pricing for our services and our ability to control our costs and
maintain the relationship with the customer for an adequate period of
time to recover our up-front investment. Our estimate of the
profitability of these arrangements can be adversely impacted by
declines in the assets under the customers’ management, whether due to
general declines in the securities markets or customer specific issues.
In addition, the profitability of these arrangements may be based on our
ability to cross sell additional services to these customers, and we may
be unable to do so.
In addition, performance risk exists in each contract, given our
dependence on successful conversion and implementation onto our own
operating platforms of the service activities provided. Our failure to
meet specified service levels may also adversely affect our revenue from
such arrangements, or permit early termination of the contracts by the
customer. If the current decline in overall market securities valuations
persists or our customers are unable to grow their businesses, these
relationships may not be successful. These relationships have been an
area of rapid growth in our business, and if the demand for these types
of services were to decline, we could see a slowdown in the growth rate
of our revenue.
We face significant risks developing and implementing our future
business plans and strategies.
In order to maintain and grow our business, we must continuously make
strategic decisions about our future business plans, including plans for
entering or exiting business lines or geographic markets, plans for
acquiring or disposing of businesses and plans to build new systems and
other infrastructure. Our business, our results of operations and our
financial position may be adversely affected by incorrect business and
strategic decisions or improper implementation of our decisions. If the
business decisions that we make prove erroneous, we may fail to be
responsive to industry changes or customer demands. Moreover, the
implementation of our decisions may involve significant capital outlays,
often far in advance of when we expect to derive any related revenues,
and therefore it may be difficult to alter or abandon plans without
incurring significant loss.
- 23 -
We are exposed to operational risk, which could adversely affect
our results of operations.
Operational risk is inherent in all of our activities. Our customers
have a broad array of complex and specialized servicing, confidentiality
and fiduciary requirements. We face the risk that the policies,
procedures and systems we have established to comply with our
operational requirements will fail, be inadequate or become outdated. We
also face the potential for loss resulting from inadequate or failed
internal processes, employee supervisory or monitoring mechanisms or
other systems or controls, which could materially affect our future
results of operations. Operational errors that result in us sending
funds to a failing or bankrupt entity may be irreversible, and may
subject us to losses. We may also be subject to disruptions from
external events that are wholly or partially beyond our control, which
could cause delays or disruptions to operational functions, including
information processing and financial market settlement functions. In
addition, our customers, vendors and counterparties could suffer from
such events. Should these events affect us, or the customers, vendors or
counterparties with which we conduct business, our results of operations
could be negatively affected. When we record balance sheet reserves for
probable loss contingencies from operational losses, we may be unable to
accurately estimate our exposure, and any reserves we establish to cover
operational losses may not be sufficient to cover our actual financial
exposure, which may have a material impact on our consolidated financial
condition or results of operations.
We depend on information technology, and any failures of our
information technology systems could result in significant costs and
reputational damage.
Our businesses depend on information technology infrastructure to record
and process a large volume of increasingly complex transactions, in many
currencies, on a daily basis, across numerous and diverse markets. Any
interruptions, delays or breakdowns of this infrastructure could result
in significant costs and reputational damage.
Cost shifting to foreign jurisdictions may expose us to increased
operational risk and reputational harm and may not result in expected
cost savings.
We actively strive to achieve cost savings by shifting certain business
processes to lower-cost geographic locations, including by forming joint
ventures and by establishing operations in lower cost areas, such as
Poland, India and China, and outsourcing to vendors in various
jurisdictions. This effort exposes us to the risk that we may not
maintain service quality, control or effective management within these
business operations. The increased elements of risk that arise from
conducting certain operating processes in some jurisdictions could lead
to an increase in reputational risk. During periods of transition,
greater operational risk and customer concern exist regarding the
continuity of a high level of service delivery. The extent and pace at
which we are able to move functions to lower-cost locations may also be
impacted by regulatory and customer acceptance issues. Such relocation
of functions also entails costs, such as technology and real estate
expenses, that may offset or exceed the expected financial benefits of
the lower-cost locations.
- 24 -
Any theft, loss or other misappropriation of the confidential
information we possess could have an adverse impact on our business and
could subject us to regulatory actions, litigation and other adverse
effects.
Our businesses and relationships with customers are dependent upon our
ability to maintain the confidentiality of our and our customers’ trade
secrets and confidential information (including customer transactional
data and personal data about our employees, our customers and our
customers’ customers). Unauthorized access to such information may
occur, resulting in theft, loss or other misappropriation. Any theft,
loss or other misappropriation of confidential information could have a
material adverse impact on our competitive positions, our relationships
with our customers and our reputation and could subject us to regulatory
inquiries and enforcement, civil litigation and possible financial
liability or costs.
Our businesses may be adversely affected by litigation.
From time to time, our customers may make claims and take legal action
relating to our performance of fiduciary or contractual
responsibilities. We may also face employment lawsuits or other legal
claims. In any such claims or actions, demands for substantial monetary
damages may be asserted against us and may result in financial liability
or an adverse effect on our reputation among investors or on customer
demand for our products and services. We may be unable to accurately
estimate our litigation risk exposure when we record balance sheet
reserves for probable loss contingencies. As a result, any reserves we
establish to cover any settlements or judgments may not be sufficient to
cover our actual financial exposure, which may have a material impact on
our consolidated financial condition or results of operations.
In the ordinary course of our business, we are also subject to various
regulatory, governmental and law enforcement inquiries, investigations
and subpoenas. These may be directed generally to participants in the
businesses in which we are involved or may be specifically directed at
us. In regulatory enforcement matters, claims for disgorgement, the
imposition of penalties and the imposition of other remedial sanctions
are possible.
In view of the inherent difficulty of predicting the outcome of legal
actions and regulatory matters, we cannot provide assurance as to the
outcome of any pending matter or, if determined adversely to us, the
costs associated with any such matter, particularly where the claimant
seeks very large or indeterminate damages or where the matter presents
novel legal theories, involves a large number of parties or is at a
preliminary stage. The resolution of certain pending legal actions or
regulatory matters, if unfavorable, could have an adverse effect on our
consolidated results of operations for the quarter in which such actions
or matters are resolved.
We face litigation risks in connection with SSgA’s active
fixed-income strategies.
In connection with certain of SSgA’s active fixed-income strategies, we
established a reserve of approximately $625 million to address legal
exposure and related costs in connection with such strategies during the
fourth quarter of 2007. Among other things, the portfolio managers for
certain actively managed fixed-income strategies materially increased
the exposure of these strategies to securities collateralized by
sub-prime mortgages and shifted the weighting of these portfolios to
more highly rated sub-prime instruments. During the third quarter of
2007, as the liquidity and valuations of these securities, including the
more highly rated instruments, came under increased pressure, the
performance of these strategies was adversely, and in some cases
significantly, affected. The underperformance, which was greater than
that typically associated with fixed-income funds, also caused a number
of our customers to question whether the execution of these strategies
was consistent with their investment intent. This has resulted in
several civil suits, including putative class action claims, applicable
both to funds registered under the Investment Company Act of 1940 and to
those that are exempt from such registration. These lawsuits allege,
among other things, that we failed to comply with applicable investment
limitations, disclosure obligations and our requisite standard of care
in managing these active funds, including those where we act as a
fiduciary under ERISA. We have also received, and are in the process of
responding to, inquiries or subpoenas from federal and state regulatory
authorities regarding SSgA’s active fixed-income strategies. Given our
desire to fully respond to customer concerns, in the fourth quarter of
2007, State Street undertook a further review of all the actively
managed fixed-income strategies at SSgA that were exposed to sub-prime
investments. Based on our review and ongoing discussions with customers
who were invested in these strategies, we established a reserve to
address our estimated legal exposure.
- 25 -
The reserve was established based upon our best judgment as to legal
exposures and related costs associated with certain actively managed
fixed-income investment strategies. As of December 31, 2008, we had made
settlement and related payments totaling approximately $417 million. The
amount of the original reserve was based on certain assumptions. While
we believe the reserve represents a reasonable estimate of our legal
exposure and other costs associated with these issues, we do not believe
that it is feasible to predict or determine the amount of such exposure
with certainty. As such, it is possible that we have overestimated or
underestimated our exposure. If the amount of our actual exposure is
materially different from our reserve, there would be a material impact
on our consolidated financial condition and results of operations.
We face extensive and changing government regulation, which may
increase our costs and expose us to risks related to compliance.
Most of our businesses are subject to extensive regulation by multiple
regulatory bodies, and many of the customers to which we provide
services are themselves subject to a broad range of regulatory
requirements. These regulations may affect the manner and terms of
delivery of our services. As a financial institution with substantial
international operations, we are subject to extensive regulatory and
supervisory oversight, both in the U.S. and outside the U.S. in
connection with our global operations. The regulations affect, among
other things, the scope of our activities and customer services, our
capital structure and our ability to fund the operations of our
subsidiaries, our lending practices, our dividend policy and the manner
in which we market our services. Evolving regulations, such as the Basel
II and other global regulatory capital frameworks, short-selling
regulations and anti-money laundering regulations, may impose
significant compliance costs on us. The disruption of the financial
markets in 2008 and resulting governmental support of, and loss of
confidence in, financial institutions is likely to result in demand for
increased and more extensive regulation of our business both in the U.S
and internationally. Different countries may respond to the market and
economic environment in different and potentially conflicting manner,
which could have the impact of increasing the cost of compliance for us.
New or modified regulations and related regulatory guidance may have
unforeseen or unintended adverse effects on the financial services
industry.
- 26 -
If we do not comply with governmental regulations, we may be subject to
fines, penalties, lawsuits or material restrictions on our businesses in
the jurisdiction where the violation occurred, which may adversely
affect our business operations and, in turn, our financial results.
Similarly, many of our customers are subject to significant regulatory
requirements, and retain our services in order for us to assist them in
complying with those legal requirements. Changes in these regulations
can significantly affect the services that we are asked to provide, as
well as our costs. In addition, adverse publicity and damage to our
reputation arising from the failure or perceived failure to comply with
legal, regulatory or contractual requirements could affect our ability
to attract and retain customers. If we cause customers to fail to comply
with these regulatory requirements, we may be liable to them for losses
and expenses that they incur. In recent years, regulatory oversight and
enforcement have increased substantially, imposing additional costs and
increasing the potential risks associated with our operations. If this
regulatory trend continues, it could adversely affect our operations
and, in turn, our financial results.
Changes in accounting standards may be difficult to predict and
may adversely affect our consolidated financial position and results of
operations.
New accounting standards, or changes in the interpretation of existing
accounting standards, by the Financial Accounting Standards Board or the
SEC, can potentially affect our consolidated financial condition and
results of operations. These changes are difficult to predict, and can
materially impact how we record and report our consolidated financial
condition and results of operations and other financial information. In
some cases, we could be required to apply a new or revised standard
retroactively, resulting in the revised treatment of certain
transactions or activities, and, in some cases, the restatement of prior
period financial statements.
Changes in tax laws or regulations, and challenges to our tax
positions with respect to historical transactions, may adversely affect
our net income, effective tax rate and our overall results of operations
and financial condition.
Our businesses can be affected by new tax legislation or the
interpretation of existing tax laws worldwide. Changes in tax laws may
affect our business directly or indirectly through their impact on the
financial markets. In the normal course of business, we are subject to
reviews by U.S. and non-U.S. tax authorities. These reviews may result
in adjustments to the timing or amount of taxes due and the allocation
of taxable income among tax jurisdictions. These adjustments could
affect the attainment of our financial goals.
Prior to 2004, we entered into certain leveraged leases, known as
sale-in, lease-out, or SILO, transactions. The Internal Revenue Service,
or IRS, challenged our tax deductions arising from those transactions.
During the second quarter of 2008, while we were engaged in settlement
discussions with them, the IRS won a court victory in a SILO case
involving other taxpayers. Shortly after that decision the IRS suspended
all SILO settlement discussions and, on August 5, 2008, issued a
standard SILO settlement offer to most taxpayers that had such
transactions. After reviewing the settlement offer carefully, we have
decided not to accept it but to continue to pursue our appeal rights
within the IRS.
- 27 -
In accordance with Statement of Financial Accounting Standards, or SFAS,
No. 13,
Accounting for Leases
, we recorded income and deferred
tax liabilities with respect to the SILO transactions based on projected
pre-tax and tax cash flows. In consideration of the terms of the
settlement offer and the context in which it was issued, we have revised
our projections of the timing and amount of the tax cash flows and we
have reflected those revisions in our leveraged lease accounting under
SFAS No. 13. In the third quarter of 2008 we substantially increased
our reserve for tax-related interest expense that may be incurred upon
resolution of this matter.
If we were to further revise our projection of the timing or amount of
the tax cash flows from the leases, SFAS No. 13 would require us to
again recalculate the rate of return and the recognition of income from
the leases from inception. In addition to the SFAS No. 13 recalculation,
it is possible that we would increase our reserve for tax-related
interest expense, which would be recorded as an increase to income tax
expense.
The quantitative models we use to manage our business may contain
errors that result in imprecise risk assessments, inaccurate valuations
or poor business decisions.
We use quantitative models to help manage many different aspects of our
business. As an input to our overall assessment of capital adequacy, we
use models to measure the amount of credit risk, market risk,
operational risk and business risk we face. During the preparation of
our financial statements, we sometimes use models to value positions for
which reliable market prices are not available. We also use models to
support many different types of business decisions including trading
activities, hedging, asset-liability management and whether to change
business strategy. In all of these uses, errors in the underlying model
could result in unanticipated and adverse consequences. Because of our
widespread usage of models, potential errors in models pose an ongoing
risk to us.
Our controls and procedures may fail or be circumvented, and our
risk management policies and procedures may be inadequate.
We may fail to identify and manage risks related to a variety of aspects
of our business, including, but not limited to, operational risk,
interest-rate risk, trading risk, fiduciary risk, legal and compliance
risk, liquidity risk and credit risk. We have adopted various controls,
procedures, policies and systems to monitor and manage risk. We cannot
provide assurance that those controls, procedures, policies and systems
are adequate to identify and manage the risks inherent in our various
businesses. In addition, our businesses and the markets in which we
operate are continuously evolving. We may fail to fully understand the
implications of changes in our business or the financial markets and
fail to adequately or timely enhance our risk framework to address those
changes. If our risk framework is ineffective, either because it fails
to keep pace with changes in the financial markets or our business or
for other reasons, we could incur losses.
We may fail to accurately quantify the magnitude of the risks we
face, which could subject us to losses.
We may fail to accurately quantify the magnitude of the risks we face.
Our measurement methodologies rely upon many assumptions and historical
analyses and correlations. These assumptions may be incorrect, and the
historical correlations we rely on may not continue to be relevant.
Consequently, the measurements that we make for regulatory and economic
capital may not adequately capture or express the true risk profiles of
our businesses. Additionally, as businesses and markets evolve, our
measurements may not accurately reflect those changes. While our risk
measures may indicate sufficient capitalization, we may in fact have
inadequate capital to conduct our businesses.
- 28 -
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
|
|
Description
|
|
|
|
99.1
|
|
News release dated January 20, 2009, announcing fourth quarter 2008
results of operations and related financial information (such
Exhibit 99.1 is furnished and not filed).
|
|
|
|
99.2
|
|
Slide presentation pertaining to the State Street-sponsored
asset-backed commercial paper conduit program as of December 31,
2008 (such Exhibit 99.2 is furnished and not filed).
|
|
|
|
99.3
|
|
Slide presentation pertaining to State Street’s investment
portfolio as of December 31, 2008 (such Exhibit 99.3 is furnished
and not filed).
|
- 29 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
|
STATE STREET CORPORATION
|
|
|
|
|
|
Date:
|
January 20, 2009
|
By:
|
/s/ James J. Malerba
|
|
|
|
Name:
|
James J. Malerba
|
|
|
|
Title:
|
Executive Vice President
|
|
|
|
|
and Corporate Controller
|
|
|
|
|
|
|
|
|
|
|
|
- 30 -
E
xhibit
Index
Exhibit No.
|
Description
|
|
|
99.1
|
News release dated January 20, 2009, announcing fourth quarter
2008 results of operations and related financial information (such
Exhibit 99.1 is furnished and not filed).
|
|
|
99.2
|
Slide presentation pertaining to the State Street-sponsored
asset-backed commercial paper conduit program as of December 31,
2008 (such Exhibit 99.2 is furnished and not filed).
|
|
|
99.3
|
Slide presentation pertaining to State Street’s investment
portfolio as of December 31, 2008 (such Exhibit 99.3 is furnished
and not filed).
|
- 31 -
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