Q3 2024 Report (charles schwab liquidity coverage ratio disclosure Q3 2024)

The Charles Schwab Corporation

Liquidity Coverage Ratio

Disclosure Report

For the quarter ended September 30, 2024

1. About The Charles Schwab Corporation

The Charles Schwab Corporation (CSC) is a savings and loan holding company, headquartered in Westlake, Texas. CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. CSC is regulated, supervised, and examined by the Board of Governors of the Federal Reserve System (Federal Reserve).

1. Liquidity Coverage Ratio

The U.S. Liquidity Coverage Ratio (LCR) rule is designed to promote resiliency of the banking sector by requiring that certain large U.S. banking organizations (Covered Companies) maintain a liquidity risk profile which ensures that they have sufficient High Quality Liquid Assets (HQLA), such as central bank reserves, certain government securities, and eligible corporate debt that can be converted easily and quickly to cash, to survive a significant stress event lasting 30 days.

The LCR rule requires Covered Companies, including Schwab, to maintain an amount of HQLA that are unencumbered and controlled by the Covered Company's liquidity management function sufficient to meet a designated percentage of their total stressed net cash outflows over a prospective 30 calendar- day period, as calculated in accordance with the LCR rule.

Schwab is subject to the LCR and public disclosure requirement on a consolidated basis. On a quarterly basis the Company is required to disclose the average daily LCR over the quarter, and the Company also discloses quantitative and qualitative information over certain portions of the Company's LCR components.

Under the LCR rule, Schwab is required to maintain HQLA to cover 100% of the total stressed net cash outflows on a daily basis. In addition, HQLA that are held at the Company's bank subsidiaries in excess of the subsidiaries' total net cash outflows, and are not transferable to non-bank affiliates, are excluded by rule from the Company's eligible HQLA.

1. Excludes non-transferable liquidity at subsidiaries.

Schwab's LCR fluctuates period over period as a result of its liquidity profile, market conditions, client behavior, legal or regulatory developments, liquidity risk management limits, or other factors in the markets in which it operates. The Company's average LCR increased between the second quarter of 2024 and the third quarter of 2024, from 119.78% to 130.26% primarily due to an increase in secured funding at the broker-dealer subsidiary.

Although not subject to a separate public disclosure requirement, Schwab's bank subsidiaries are subject to LCR requirements and were in compliance with their respective LCR requirements during the periods presented.

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1. Liquidity Management at Schwab

The Company seeks to maintain client confidence in its balance sheet and the safety of client assets by maintaining high levels of liquidity and diversity of funding sources in both expected and stressed market conditions.

Liquidity Management (First Line of Defense) resides within the Company's Corporate Treasury function and is tasked with developing and implementing a liquidity and funding management strategy and managing liquidity in accordance with the Company's Board-approved risk appetite.

The Financial Risk Management (Second Line of Defense) function is responsible for independently assessing the effectiveness and adequacy of the Company's liquidity risk management processes in accordance with the Board-approved Liquidity Risk Policy.

These functions together with Internal Audit (Third Line of Defense), operate under a comprehensive liquidity risk management framework. This framework includes but is not limited to:

• Early Warning Indicators - to measure, monitor and anticipate potential liquidity risk that may be developing.
• Cash Flow Projections - to ensure adequate levels of liquidity and identify any potential mismatches that may arise from assets, liabilities, and contractual obligations.
• Liquidity Stress Testing - to ensure that the Company has sufficient liquidity and funding under a variety of adverse scenarios.
• High-QualityLiquid Assets and Highly Liquid Assets Monetization - to demonstrate the capability to monetize a sample of HQLA and HLA buffers to meet operational requirements.
• Contingency Funding Plans - to identify and document a range of events, their severity, available sources of funding, as well as the responsible crisis management team that would execute on the plan.
• Regulatory Compliance - to adhere to regulations like Regulation LL - Enhanced Prudential Standards and Regulation WW - Liquidity Risk Measurement, Standards and Reporting, among other applicable laws and regulations.

The Company's Liquidity Risk Management Framework and execution is driven by a Global Risk Committee, which is comprised of senior executives from each major business and control function. Senior management takes an active role in the liquidity risk management process. The Financial Risk Oversight Committee is responsible for approving Policy Limits, as well as Liquidity Risk Metrics. The Asset Liability Management Committee is responsible for reviewing these approvals. The risk metrics, with risk limits and tolerance levels, are established for key risk categories by the Global Risk Committee and its functional risk sub-committees. Additional details of the Company's liquidity risk management framework are provided in the "Risk Management" section of Company's 10-K annual form.

IV. LCR Quantitative Disclosure

In the following table, the figures reported in the "Average Weighted Amount" column reflect the prescribed, industry-wide assumptions and haircuts defined by the LCR rule to determine a Covered Company's eligible HQLA, cash outflow amounts and cash inflow amounts. The figures reported in the "Average Unweighted Amount" column reflect gross values that are not included in the calculation used to determine the Company's compliance with LCR requirements.

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collateralized by investment securities and the ability to issue Certificates of Deposits as a source of short-term liquidity. Long-term needs are also met by funding provided by long term debt issuances by CSC in the capital markets.

1. Derivative Exposures and Potential Collateral Calls

Schwab uses cleared interest rate swaps primarily to manage interest rate risk exposures that arise from business activities. The Company's net derivative outflows consist of variation margin, initial margin and historical potential derivative valuation changes as specified by the LCR rule. The Company's derivative exposure did not constitute a material portion of net cash outflows in the third quarter of 2024.

1. Currency Mismatch in the Liquidity Coverage Ratio

Schwab does not have material exposure to a currency mismatch.

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