Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

$1.80 Cumulative Convertible Preferred Stock - Series B, par value $1.00

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No     

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes      No X

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No     

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes X No     

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes      No X

The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2018 , determined using the per share closing price on that date on the New York Stock Exchange of $135.10, was approximately $62.7 billion . There is no non-voting common equity of the registrant outstanding.

Number of shares of registrant’s common stock outstanding at February 8, 2019 : 453,612,522

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement of The PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for the 2019 annual meeting of shareholders (Proxy Statement) are incorporated by reference into Part III of this Form 10-K.

T HE PNC F INANCIAL S ERVICES G ROUP , I NC .

Cross-Reference Index to 2018 Form 10-K

TABLE OF CONTENTS

T HE PNC F INANCIAL S ERVICES G ROUP , I NC .

Cross-Reference Index to 2018 Form 10-K (continued)

TABLE OF CONTENTS (Continued)

 

T HE PNC F INANCIAL S ERVICES G ROUP , I NC .

Cross-Reference Index to 2018 Form 10-K (continued)

 

MD&A TABLE REFERENCE

 

T HE PNC F INANCIAL S ERVICES G ROUP , I NC .

Cross-Reference Index to 2018 Form 10-K (continued)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE

 

T HE PNC F INANCIAL S ERVICES G ROUP , I NC .

Cross-Reference Index to 2018 Form 10-K (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (Continued)

 

 

Supervision and Regulation

The PNC Financial Services Group, Inc. is a bank holding company (BHC) registered under the Bank Holding Company Act of 1956 (BHC Act) and a financial holding company under the Gramm-Leach-Bliley Act (GLB Act).

We are subject to numerous governmental regulations, some of which are highlighted below. See Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of this Report for additional information regarding our regulatory matters. Applicable laws and regulations restrict our permissible activities and investments, impose conditions and requirements on the products and services we offer and the manner in which they are offered and sold, and require compliance with protections for loan, deposit, brokerage, fiduciary, investment management and other customers, among other things. They also restrict our ability to repurchase stock or pay dividends, or to receive dividends from our bank subsidiary, and impose capital adequacy and liquidity requirements. The consequences of noncompliance with these, or other applicable laws or regulations, can include substantial monetary and nonmonetary sanctions.

In addition, we are subject to comprehensive supervision and periodic examination by, among other regulatory bodies, the Board of Governors of the Federal Reserve System (Federal Reserve) and the Office of the Comptroller of the Currency (OCC). These examinations consider not only compliance with applicable laws, regulations and supervisory policies of the agency, but also capital levels, asset quality, risk management effectiveness, the ability and performance of management and the board of directors, the effectiveness of internal controls, earnings, liquidity and various other factors.

The results of examination activity by any of our federal bank regulators potentially can result in the imposition of significant limitations on our activities and growth. These regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity and take enforcement action, including the imposition of substantial monetary penalties and nonmonetary requirements, against a regulated entity where the relevant agency determines, among other things, that the operations of the regulated entity or any of its subsidiaries fail to comply with applicable law or regulations, are conducted in an unsafe or unsound manner, or represent an unfair or deceptive act or practice. This supervisory framework, including the examination reports and supervisory ratings (which are not publicly available) of the agencies, could materially impact the conduct, growth and profitability of our operations.

The Consumer Financial Protection Bureau (CFPB) is responsible for examining PNC Bank and its affiliates (including PNC) for compliance with most federal consumer financial protection laws, including the laws relating to fair lending and prohibiting unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products or services, and for enforcing such laws with respect to PNC Bank and its affiliates. The results of the CFPB’s examinations (which are not publicly available) also can result in restrictions or limitations on the operations of a regulated entity as well as enforcement actions against a regulated entity, including the imposition of substantial monetary penalties and nonmonetary requirements.

We also are subject to regulation by the Securities and Exchange Commission (SEC) by virtue of our status as a public company and by the SEC and the Commodity Futures Trading Commission (CFTC) due to the nature of some of our businesses. Our businesses with operations outside the United States also are subject to regulation by appropriate authorities in the foreign jurisdictions in which they do business.

As a regulated financial services firm, our relationships and good standing with regulators are of fundamental importance to the operation and growth of our businesses. The Federal Reserve, OCC, CFPB, SEC, CFTC and other domestic and foreign regulators have broad enforcement powers, and certain of the regulators have the power to approve, deny, or refuse to act upon our applications or notices to conduct new activities, acquire or divest businesses, assets or deposits, expand our operations geographically, or reconfigure existing operations.

Among the areas that have been receiving a high level of regulatory focus are compliance with the Bank Secrecy Act and anti-money laundering laws, capital and liquidity management, fair lending and other consumer protection laws and regulations, including those governing retail sales practices, fee disclosures, unfair, deceptive or abusive acts or practices, collection practices, and protections for military service members and individuals in bankruptcy, cyber security, capital planning and stress testing, the oversight of arrangements with third-party vendors and suppliers, the protection of confidential customer information, and the structure and effectiveness of enterprise risk management frameworks.

New legislation, changes in rules promulgated by federal financial regulators, other federal and state regulatory authorities and self-regulatory organizations, or changes in the interpretation or enforcement of existing laws and rules, may directly affect the operations and profitability of our businesses. We anticipate new legislative and regulatory initiatives over the next several years, focused specifically on banking and other financial services in which we are engaged. Legislative and regulatory developments to date, as well as those that come in the future, have had and are likely to continue to have an impact on the conduct of our business. The more detailed description of the significant regulations to which we are subject included in this Report is based on current laws and

regulations and is subject to potentially material change. See also the additional information included as Risk Factors in Item 1A of this Report discussing the impact of financial regulatory initiatives on the regulatory environment for us and the financial services industry.

The profitability of our businesses could also be affected by rules and regulations that impact the business and financial sectors in general, including changes to the laws governing taxation, antitrust regulation, electronic commerce, data security and privacy.

There are numerous rules governing the regulation of financial services institutions and their holding companies. Accordingly, the following discussion is general in nature and does not purport to be complete or to describe all of the laws, regulations and supervisory policies that apply to us. To a substantial extent, the purpose of the regulation and supervision of financial services institutions and their holding companies is not to protect our shareholders and our non-customer creditors, but rather to protect our customers (including depositors) and the financial markets and financial system in general.

Banking Regulation and Supervision

Regulatory Capital Requirements, Stress Testing and Capital Planning . PNC and PNC Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, respectively. The foundation of the agencies’ regulatory capital rules is the international regulatory capital framework developed by the Basel Committee on Banking Supervision (Basel Committee), the international body responsible for developing global regulatory standards for banking organizations for consideration and adoption by national jurisdictions. The regulatory capital rules establish minimum requirements for the ratio of a banking organization’s regulatory capital to its risk-weighted assets, referred to as risk-based capital requirements, as well as for the ratio of its regulatory capital to measures of assets and other exposures, referred to as leverage capital requirements. The agencies’ regulatory capital rules have undergone significant change since 2013, when the agencies adopted final rules to implement the Basel Committee's international regulatory capital framework, known as “Basel III”, as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Certain provisions (described below) of these rules currently apply only to banking organizations that have $250 billion or more in total consolidated assets (such as PNC and PNC Bank) or that have $10 billion or more in on-balance sheet foreign exposure (referred to as advanced approaches banking organizations).

In 2018, the Federal Reserve, OCC and Federal Deposit Insurance Corporation (FDIC) requested comment on a set of proposed rules that would better tailor the application of the agencies’ capital (including stress testing) and liquidity rules, and the Federal Reserve’s enhanced prudential standards (EPS) adopted under Section 165 of Dodd-Frank, to banking organizations with $100 billion or more in consolidated total assets based on the risk profile and asset size of the organization (the Tailoring Proposals). The Tailoring Proposals would classify all bank holding companies (BHCs) with $100 billion or more in total assets into one of four categories (Category I, Category II, Category III and Category IV), with the most stringent capital, liquidity and EPS requirements applying to Category I firms and the least restrictive requirements applying to Category IV firms. The classification of any bank subsidiary of a BHC would generally follow that of its parent BHC. PNC and PNC Bank would be Category III firms under the Tailoring Proposals because PNC (i) has more than $250 billion in consolidated total assets, (ii) is not designated as a globally systemically important bank (GSIB), and (iii) has less than $75 billion in cross-jurisdictional activity (as defined by the proposals). The public comment period on the Tailoring Proposals closed on January 22, 2019. As described below, the Tailoring Proposals, if adopted in the form proposed, would make several important changes to the capital, liquidity and enhanced prudential standards requirements applicable to PNC and PNC Bank. However, it is unclear when, or if, the agencies may finalize the Tailoring Proposals or when the provisions of the Tailoring Proposals (if adopted in final) might become effective. In addition, any final tailoring rules adopted by the agencies could differ, perhaps materially, from the proposals issued for comment.

The regulatory capital rules generally divide regulatory capital into three components: common equity tier 1 (CET1) capital, additional Tier 1 capital (which, together with CET1 capital, comprises Tier 1 capital) and Tier 2 capital. CET1 capital is generally common stock, retained earnings, qualifying minority interest and, for PNC and PNC Bank as advanced approaches banking organizations, accumulated other comprehensive income (AOCI) related to both available for sale securities and pension and other post-retirement plans, less the deductions required to be made from CET1 capital. The Tailoring Proposals would allow PNC and PNC Bank to elect to exclude AOCI related to both available for sale securities and pension and other post-retirement plans from CET1 capital. Additional Tier 1 capital generally includes, among other things, perpetual preferred stock and qualifying minority interests, less the deductions required to be made from additional Tier 1 capital. Tier 2 capital generally comprises qualifying subordinated debt, less any required deductions from Tier 2 capital. There are significant limits on the extent to which minority interests in consolidated subsidiaries may be included in regulatory capital.

Total capital is the sum of Tier 1 capital and Tier 2 capital, less the deductions required from Total capital. Under the current regulatory capital rules, PNC and PNC Bank must deduct significant common stock investments in unconsolidated financial institutions, as well as mortgage servicing rights and deferred tax assets, from CET1 capital (in each case, net of associated deferred tax liabilities) to the extent such items individually exceed 10%, or in the aggregate exceed 15%, of the institution’s adjusted CET1 capital. Under the Tailoring Proposals, PNC and PNC Bank would have to deduct each of the amounts for significant common stock investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets from CET1 capital (in each

case, net of associated deferred tax liabilities) to the extent such items individually exceed 25% of the institution's adjusted CET1 capital. PNC's common stock investment in BlackRock is treated as a significant common stock investment in an unconsolidated financial institution for these purposes. As of December 31, 2018, a portion of PNC’s common stock investment in BlackRock was deducted from CET1 capital.  If the Tailoring Proposals had been in effect as of December 31, 2018, no portion of PNC’s common stock investment in BlackRock would have been deducted from CET1 capital. 

In 2018, the banking agencies jointly adopted a final rule that permits banking organizations to elect to phase-in, on a straight-line basis over a three-year period, the day-one regulatory capital effects of implementing the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) 2016-13 Financial Instruments - Credit Losses (Topic 326), commonly referred to as the Current Expected Credit Losses (CECL) standard. PNC expects to implement the CECL standard effective January 1, 2020. The final rule also generally replaces references to the allowance for loan and lease losses (ALLL) in the regulatory capital and certain other rules of the agencies with references to the allowance for credit losses (ACL) for institutions that have adopted CECL. See the Critical Accounting Estimates and Judgments section of Item 7 of this Report for more detail on the CECL standard.

The regulatory capital rules include a standardized approach for determining a banking organization’s risk-weighted assets for purposes of calculating the risk-based capital ratios. To determine risk-weighted assets under the standardized approach, a banking organization must allocate its assets and specified off-balance sheet financial exposures and instruments into risk-weighted categories. The standardized approach for risk-weighted assets takes into account credit and market risk. To calculate risk-weighted assets under the standardized approach for credit risk, the nominal dollar amounts of assets and credit equivalent amounts of off-balance sheet items are generally multiplied by risk weights set forth in the rules, with the risk weights increasing as the perceived credit risk of the relevant asset or exposure increases. For certain types of exposures, such as securitization exposures, the standardized approach establishes one or more methodologies that are to be used to calculate the risk-weighted asset amount for the exposure. High volatility commercial real estate, past due, securitization and equity exposures, as well as investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets that are not deducted from capital, are generally subject to higher risk weights than other types of exposures.

Under the currently effective regulatory capital rules, banking organizations with $250 billion or more in total consolidated assets (such as PNC and PNC Bank) are also required to calculate risk-weighted assets using a separate methodology, referred to as the advanced approaches, that is based on the Basel II capital framework. The Basel II framework seeks to provide more risk-sensitive regulatory capital calculations and promote enhanced risk management practices among large, internationally active banking organizations. Advanced approaches risk-weighted assets take into account credit, market and operational risk and rely to a significant extent on internal models. Prior to fully implementing the advanced approaches to calculate risk-weighted assets, PNC and PNC Bank must successfully complete a parallel run qualification phase. PNC and PNC Bank entered this parallel run qualification phase on January 1, 2013.

Because we remain in the parallel run qualification phase for the advanced approaches, our regulatory risk-based capital ratios in 2018 were calculated using the standardized approach for determining risk-weighted assets. Until we have exited parallel run, our regulatory risk-based capital ratios will be calculated using the standardized approach for determining risk-weighted assets. Under the currently effective capital rules, once we exit parallel run, our regulatory risk-based capital ratios will be the lower of the ratios calculated under the standardized approach and the advanced approaches. Under the Tailoring Proposals, PNC and PNC Bank would no longer be considered an advanced approaches banking organization for these purposes and would no longer be required to calculate advanced approaches risk-weighted assets.

With the exception of certain nonqualifying trust preferred capital securities included in PNC’s Total risk-based capital (which remain subject to a phase-out period that runs through 2021), the transitions and multi-year phase-in of the definition of capital under the Basel III rules were completed as of January 1, 2018. Accordingly, we refer to the capital ratios calculated using the definition of capital in effect as of January 1, 2018 and, for the risk-based ratios, standardized risk-weighted assets, as our Basel III regulatory capital ratios. The Basel III regulatory capital ratios of PNC and PNC Bank as of December 31, 2018 exceeded the applicable minimum levels. For additional information regarding the Basel III ratios of PNC and PNC Bank as of December 31, 2018, as well as the levels needed to be considered “well capitalized”, see the Liquidity and Capital Management portion of the Risk Management section of Item 7 of this Report.

The risk-based capital rules establish certain minimum standards for the capital ratios of banking organizations, including PNC and PNC Bank. Banking organizations must maintain a minimum CET1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a Total capital ratio of 8.0%, in each case in relation to risk-weighted assets, to be considered “adequately capitalized.” Banking organizations also must maintain a capital conservation buffer requirement above the minimum risk-based capital ratio requirements in order to avoid limitations on capital distributions (including dividends and repurchases of any Tier 1 capital instrument, such as common and qualifying preferred stock) and certain discretionary incentive compensation payments. The capital conservation buffer requirement became fully phased in as of January 1, 2019. As a result, banking organizations (including PNC and PNC Bank) now are required to

maintain a CET1 capital ratio of at least 7.0%, a Tier 1 capital ratio of at least 8.5%, and a Total capital ratio of at least 10.5% to avoid limitations on capital distributions and certain discretionary incentive compensation payments.

For banking organizations with $250 billion or more in total consolidated assets (such as PNC and PNC Bank), these higher capital conservation buffer levels above the regulatory minimums could be supplemented by a countercyclical capital buffer of up to an additional 2.5% of risk-weighted assets. This buffer is currently set at zero in the U.S. A Federal Reserve policy statement establishes the framework and factors the Federal Reserve would use in setting and adjusting the amount of the U.S. countercyclical capital buffer. Covered banking organizations would generally have 12 months after the announcement of any increase in the countercyclical capital buffer to meet the increased buffer requirement, unless the Federal Reserve determines to establish an earlier effective date. If the full countercyclical buffer amount is implemented, PNC and PNC Bank would be required to maintain a CET1 capital ratio of at least 9.5%, a Tier 1 capital ratio of at least 11%, and a Total capital ratio of at least 13% to avoid limitations on capital distributions and certain discretionary incentive compensation payments.

PNC and PNC Bank are not subject to the additional CET1 capital surcharge, minimum long-term debt requirement, or minimum total loss-absorbing capacity (TLAC) requirement that applies to U.S. GSIBs.

The regulatory capital rules also require that banking organizations maintain a minimum amount of Tier 1 capital to average consolidated assets, referred to as the leverage ratio. Banking organizations are required to maintain a minimum leverage ratio of Tier 1 capital to total assets of 4.0%. As of December 31, 2018, the leverage ratios of PNC and PNC Bank were above the required minimum level.

Banking organizations with $250 billion or more in total consolidated assets (such as PNC and PNC Bank) also are subject to a minimum 3.0% supplementary leverage ratio. The supplementary leverage ratio is calculated by dividing Tier 1 capital by total leverage exposure, which takes into account on-balance sheet assets as well as certain off-balance sheet items, including loan commitments and potential future exposure under derivative contracts. BHCs with total consolidated assets of more than $700 billion or assets under custody of more than $10 trillion, as well as the insured depository institution subsidiaries of these BHCs, are subject to a higher supplementary leverage ratio requirement. These higher supplementary leverage requirements do not apply to PNC or PNC Bank.

Failure to meet applicable capital requirements could subject a banking organization to a variety of enforcement remedies available to the federal banking agencies, including a limitation on the ability to pay dividends or repurchase shares, the issuance of a capital directive to increase capital and, in severe cases, the termination of deposit insurance by the FDIC, and the appointment of a conservator or receiver. In some cases, the extent of these powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” The thresholds at which an insured depository institution is considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized” are based on (i) the institution’s CET1, Tier 1 and total risk-based capital ratios; (ii) the institution’s leverage ratio; and (iii) for the definitions of “adequately capitalized” and “undercapitalized”, the institution’s supplementary leverage ratio. Generally, the smaller an institution’s capital base in relation to its risk-weighted or total assets, the greater the scope and severity of the agencies’ powers. Business activities may also be affected by an institution’s capital classification. For example, as a financial holding company, PNC and PNC Bank must remain “well capitalized.” At December 31, 2017, PNC and PNC Bank exceeded the required ratios for classification as “well capitalized.” For additional discussion of capital adequacy requirements, see the Liquidity and Capital Management portion of the Risk Management section of Item 7 of this Report and to Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of this Report.

As discussed further in Item 1A Risk Factors of this Report, the Basel Committee in 2017 finalized additional, significant changes to the Basel III international capital framework for banking organizations. The extent to and manner in which these or similar changes by the Basel Committee would be implemented by the U.S. banking agencies, and the implications of any such developments on the U.S. regulatory capital framework applicable to PNC and PNC Bank, are not fully known at this time.

In addition to regulatory capital requirements, we are subject to the Federal Reserve’s capital plan rule, annual capital stress testing requirements and Comprehensive Capital Analysis and Review (CCAR) process, as well as the annual and mid-year Dodd-Frank capital stress testing (DFAST) requirements of the Federal Reserve (annual and mid-cycle) and the OCC (annual).

As part of the CCAR process, the Federal Reserve undertakes a supervisory assessment of the capital planning process of BHCs, including PNC, that have $100 billion or more in total consolidated assets. For us, this capital planning assessment is based on a review of a comprehensive capital plan submitted to the Federal Reserve that describes the company’s planned capital actions, such as plans to pay or increase common stock dividends, engage in common stock repurchase programs, or issue or redeem preferred stock or other regulatory capital instruments, during the nine quarter review period, as well as the results of stress tests conducted by both the company and the Federal Reserve under different hypothetical macro-economic scenarios, including a supervisory adverse scenario and severely adverse scenario provided by the Federal Reserve. The agencies have requested comment on proposed rules that would

eliminate the supervisory adverse scenario in the CCAR and DFAST stress testing processes, but it is unclear when or if these proposals may be finalized, or when these changes (if adopted in final) might become effective.

The Federal Reserve can object to our capital plan for qualitative or quantitative reasons. If the Federal Reserve objects to a BHC’s capital plan, the BHC cannot make capital distributions without Federal Reserve approval. In evaluating PNC's capital plan, the Federal Reserve considers a number of qualitative factors, which have become increasingly important in the CCAR process in recent years. The Federal Reserve’s supervisory expectations for the capital planning and stress testing processes at large and complex BHCs, including PNC, are heightened relative to smaller and less complex BHCs. In assessing a BHC’s capital planning and stress testing processes, the Federal Reserve considers whether the BHC has sound and effective governance to oversee these processes. The Federal Reserve’s evaluation focuses on whether a BHC’s capital planning and stress testing processes are supported by a strong risk management framework to identify, measure and assess material risks and that provides a strong foundation to capital planning. The Federal Reserve also considers the comprehensiveness of a BHC’s control framework and evaluates a BHC’s policy guidelines for capital planning and assessing capital adequacy. A BHC’s stress testing scenario design processes and approaches for estimating the impact of stress on its capital position, including stress testing models and non-model qualitative approaches, are comprehensively reviewed to ensure that projections reflect the impact of appropriately stressful conditions, as well as risks idiosyncratic to the BHC, on its capital position. Significant deficiencies in a BHC’s capital planning and stress testing processes may result in a qualitative objection by the Federal Reserve to its capital plan.

From a quantitative perspective, the Federal Reserve considers whether under different hypothetical macro-economic scenarios, including the supervisory severely adverse scenario, the BHC would be able to maintain, throughout each quarter of the nine quarter review period, projected regulatory risk-based and leverage capital ratios that exceed the applicable minimums. In making these estimates, the Federal Reserve assumes that the BHC would continue its base case capital actions in each supervisory scenario, including the severely adverse scenario. Failure to meet a minimum regulatory risk-based or leverage capital requirement on a projected stress basis is grounds for objection to a BHC’s capital plan.

In connection with the 2019 CCAR exercise, we must file our capital plan and stress testing results using financial data as of December 31, 2018 with the Federal Reserve by April 5, 2019. We expect to receive the Federal Reserve’s response (either a non-objection or objection) to the capital plan submitted as part of the 2019 CCAR in June 2019.

As part of the CCAR and annual DFAST processes, both we and the Federal Reserve release certain revenue, loss and capital results from stress testing exercises. For the 2019 exercises, the Federal Reserve has announced that it intends to publish its supervisory revenue, loss and capital projections for participating BHCs under the supervisory adverse and severely adverse macro-economic scenarios using the common assumptions concerning capital distributions established by the Federal Reserve in its DFAST regulations, as well as capital ratio information using the company’s proposed base case capital actions. Within 15 days of the Federal Reserve publishing its DFAST results, we also are required to publicly disclose our own estimates of certain capital, revenue and loss information under the same hypothetical supervisory severely adverse macro-economic scenario and applying the same capital action assumptions.

Federal Reserve regulations also require that we and other large BHCs conduct a separate, mid-cycle stress test using financial data as of June 30 and three company-derived macro-economic scenarios (base, adverse and severely adverse) and publish a summary of the results under the severely adverse scenario. For the 2019 mid-cycle stress test cycle, we must publish our results in the period between October 5 and November 4, 2019. Under the Tailoring Proposals, the Federal Reserve has proposed to eliminate the mid-cycle DFAST stress test beginning in 2020, and to allow Category III BHCs (like PNC) to conduct the company-run DFAST stress test biennially (rather than annually, as currently required).

The Federal Reserve’s capital plan rule provides that a BHC must resubmit a new capital plan prior to the annual submission date if, among other things, there has been or will be a material change in the BHC’s risk profile, financial condition or corporate structure since its last capital plan submission. Under the “de minimis” safe harbor of the Federal Reserve’s capital plan rule, we may make limited repurchases of common stock or other capital distributions in amounts that exceed the amounts included in our most recently approved capital plan subject to certain conditions, including that the Federal Reserve does not object to the additional repurchases or distributions. Such additional distributions may not exceed, in the aggregate, 0.25% of Tier 1 capital during the relevant 12-month period. The Federal Reserve’s capital plan rule also allows a BHC to request the Federal Reserve’s approval to make additional capital distributions, above the amounts permitted by this de minimis safe harbor and the amounts included in its most recently approved capital plan, provided that, among other things, the request is filed between July 1 and March 30 of the relevant capital plan year. In 2018, PNC received approval from the Federal Reserve for additional capital distributions above the amounts included in our most recently approved capital plan. See the Liquidity and Capital Management portion of the Risk Management section in Item 7 of this Report for additional detail.

In 2018, the Federal Reserve requested public comment on a proposal that would integrate its capital plan rule, stress test rules and the annual CCAR exercise with its Basel III regulatory capital rules. Among other things, the proposal would introduce new CET1 and

Tier 1 leverage stress capital buffer requirements. The CET1 and Tier 1 leverage stress capital buffers for a covered BHC would equal (i) the percentage decline in the BHC’s CET1 and Tier 1 leverage ratios, respectively, in the most recently completed CCAR exercise as projected by the Federal Reserve under its supervisory severely adverse scenario, plus (ii) the BHC’s projected common stock dividends in the fourth through seventh quarter of that exercise (expressed as a ratio to the BHC’s total risk-weighted assets or average total consolidated assets, as applicable). The CET1 stress capital buffer would have a minimum “floor” of 2.5%. The CET1 and Tier 1 leverage stress capital buffers would replace the Basel III capital conservation buffer for covered BHCs. That is, a covered BHC (such as PNC) would, for example, be subject to limitations on capital distributions and certain discretionary incentive compensation payments if its CET1 ratio fell below (i) 4.5%, plus (ii) its applicable CET1 stress capital buffer, plus (iii) any applicable countercyclical capital buffer (which is currently set at zero in the United States). BHCs that are GSIBs or have exited parallel run under the advanced approaches would be subject to additional capital buffer requirements. In connection with these changes, the Federal Reserve proposed to make a number of other changes to the CCAR process.

Regulatory Liquidity Standards and Liquidity Risk Management Requirements . The Basel Committee's Basel III framework includes short-term liquidity standards (Liquidity Coverage Ratio or LCR) and long-term funding standards (Net Stable Funding Ratio or NSFR).

The U.S. banking agencies' LCR rules are designed to ensure that covered banking organizations maintain an adequate level of cash and high quality, unencumbered liquid assets (HQLA) to meet estimated net liquidity needs in a short-term stress scenario using liquidity inflow and outflow assumptions prescribed in the rules (net cash outflow). A company’s LCR is the amount of its HQLA, as defined and calculated in accordance with the haircuts and limitations in the rule, divided by its net cash outflows, with the quotient expressed as a percentage. The regulatory minimum LCR that covered banking organizations are required to maintain is 100%. As of December 31, 2018, the LCR for PNC and PNC Bank exceeded the fully phased-in requirement of 100%.

Top-tier BHCs (like PNC) that have $250 billion or more in assets, as well as any subsidiary depository institution of such a company that has $10 billion or more in total consolidated assets (such as PNC Bank), currently are subject to the full LCR (rather than the less stringent modified LCR). PNC and PNC Bank are required to calculate the LCR on a daily basis. Under the full LCR, an institution required to calculate the LCR on a daily basis must promptly provide its regulator with a plan for achieving compliance with the minimum LCR requirement if its LCR is below the minimum requirement for three consecutive business days.

The Federal Reserve requires large BHCs, including PNC, to publicly disclose certain quantitative and qualitative measures of their LCR-related liquidity profile. These disclosures include major components used to calculate the LCR ( e.g. , HQLA, cash outflows and inflows for the consolidated parent company), and a qualitative discussion of the BHC’s LCR results, including, among other things, key drivers of the results, composition of HQLA and concentration of funding sources. We began making these disclosures (through postings on our website) in the second quarter of 2018.

The NSFR is designed to promote a stable maturity structure of assets and liabilities of banking organizations over a one-year time horizon. In 2016, the federal banking agencies requested comment on proposed rules that would implement the NSFR in the United States. The proposed rules would require a covered BHC to calculate its NSFR as the ratio of its available stable funding (ASF) to its required stable funding (RSF) amount, each as defined in the proposed rules, over a one-year horizon. The regulatory minimum ratio for all covered banking organizations (expressed as a percentage) is 100%. Under the proposal, PNC and PNC Bank would be subject to the full NSFR, rather than the less stringent modified NSFR. The proposal also includes requirements for quarterly quantitative and qualitative NSFR disclosures. Although the impact on us will not be fully known until the rules are finalized, we have taken several actions to prepare for implementation of the NSFR and we expect to be in compliance with the NSFR requirements if and when they become effective.

The Tailoring Proposals would reduce the LCR requirements and the proposed NSFR requirements for Category III banking organizations that, like PNC and PNC Bank, have less than $75 billion in weighted short-term wholesale funding. Under the Tailoring Proposals, the net cash ouflows calculated under the LCR rules and the RSF amount determined under the proposed NSFR rules for such a Category III organization would be scaled by a factor of between 70% and 85%, thereby reducing the amount of HQLA and ASF that the organization would have to maintain to meet its LCR and NSFR minimum ratio, respectively.

PNC also is subject to Federal Reserve rules that require BHCs with $100 billion or more in consolidated total assets to, among other things, conduct internal liquidity stress tests over a range of time horizons, maintain a buffer of highly liquid assets sufficient to meet projected net outflows under the BHC’s 30-day liquidity stress test, and maintain a contingency funding plan that meets certain requirements.

For additional discussion of regulatory liquidity requirements, please refer to the Liquidity and Capital Management portion of the Risk Management section of Item 7 of this Report.

Source of Parent Company Liquidity and Dividends . The principal source of our liquidity at the parent company level is dividends from PNC Bank. PNC Bank is subject to various restrictions on its ability to pay dividends to PNC Bancorp, Inc., its direct parent, which is a wholly-owned direct subsidiary of The PNC Financial Services Group, Inc. PNC Bank is also subject to federal laws limiting extensions of credit to its parent holding company and non-bank affiliates as discussed in Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of this Report. Further information on bank level liquidity and parent company liquidity is also available in the Liquidity and Capital Management portion of the Risk Management section of Item 7 of this Report

Federal Reserve rules provide that a BHC is expected to serve as a source of financial strength to its subsidiary banks and to commit resources to support such banks if necessary. Dodd-Frank requires that the Federal Reserve jointly adopt new rules with the OCC and the FDIC to implement this source of strength requirement. These joint rules have not yet been proposed. Consistent with this source of strength policy for subsidiary banks, the Federal Reserve has stated that, as a matter of prudent banking, a BHC generally should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the corporation’s capital needs, asset quality and overall financial condition. Further, in providing guidance to the large BHCs participating in the CCAR exercise, discussed above, the Federal Reserve has expected capital plans to reflect conservative dividend payout ratios. Requests that imply common dividend payout ratios above 30% of projected after-tax net income available to common shareholders have typically received particularly close scrutiny.

Enhanced Prudential Requirements . Under Federal Reserve rules, PNC and other BHCs with total consolidated assets of $100 billion or more are subject to various enhanced prudential standards related to liquidity risk management and overall risk management. For PNC, these rules, among other things, establish liquidity stress testing requirements (discussed above), limitations on PNC’s aggregate net credit exposures to any single, unaffiliated company (referred to as the single counterparty credit limit (SCCL)), and certain oversight and governance responsibilities for PNC's chief risk officer, the board of directors, and the risk committee of the board of directors. Under the Federal Reserve’s SCCL rules, which become effective July 1, 2020, PNC’s aggregate net credit exposure (including exposure resulting from, among other transactions, extensions of credit, repurchase and reverse repurchase transactions, investments in securities, and derivative transactions) to any unaffiliated counterparty may not exceed 25% of PNC’s Tier 1 capital. PNC is in the process of obtaining guidance from the Federal Reserve on how investments accounted for under the equity method, such as its investment in BlackRock, should be treated for purposes of the SCCL. At present, we do not expect the SCCL will have a material impact on PNC.

Under Dodd-Frank, the Federal Reserve is required to impose a maximum 15-to-1 debt to equity ratio on a BHC if the federal agencies that comprise the Financial Stability Oversight Council (FSOC) determine that the company poses a grave threat to the financial stability of the United States and that the imposition of such a debt-to-equity requirement would mitigate such risk. The Federal Reserve also is required to establish early remediation requirements for BHCs with more than $250 billion in total assets and continues to work towards finalizing these requirements.

The Federal Reserve may continue to develop the set of enhanced prudential standards that apply to large BHCs in order to further promote the resiliency of such firms and the U.S. financial system. For additional information, see Item 1A Risk Factors of this Report.

Additional Powers Under the GLB Act . The GLB Act permits a qualifying BHC, such as PNC, to become a “financial holding company” and thereby engage in, or affiliate with financial companies engaging in, a broader range of activities than would otherwise be permitted for a BHC. Permitted affiliates include securities underwriters and dealers, insurance companies, insurance agents and companies engaged in other activities that are determined by the Federal Reserve, in consultation with the Secretary of the Treasury, to be “financial in nature or incidental thereto” or are determined by the Federal Reserve unilaterally to be “complementary” to financial activities. We became a financial holding company as of March 13, 2000. A BHC qualifies to become a financial holding company if the BHC and its subsidiary depository institutions are “well capitalized” and “well managed” and its subsidiary depository institutions have a rating under the Community Reinvestment Act (CRA) of Satisfactory or better. Among other activities, we currently rely on our status as a financial holding company to conduct merchant banking activities and securities underwriting and dealing activities. As subsidiaries of a financial holding company under the GLB Act, our non-bank subsidiaries are generally allowed to conduct new financial activities, and we are generally permitted to acquire non-bank financial companies that have less than $10 billion in assets, with after-the-fact notice to the Federal Reserve.

In addition, the GLB Act permits qualifying national banks to engage in expanded activities through a “financial subsidiary.” PNC Bank has filed a financial subsidiary certification with the OCC and currently engages in insurance agency activities through financial subsidiaries. PNC Bank may also generally engage through a financial subsidiary in any activity that is determined to be financial in nature or incidental to a financial activity by the Secretary of the Treasury, in consultation with the Federal Reserve (other than insurance underwriting activities, insurance company investment activities and merchant banking). In order to establish a financial subsidiary, a national bank and each of its depository institution affiliates must be “well capitalized” and “well managed” and the national bank and each of its depository institution affiliates must have a CRA rating of Satisfactory or better.

If a financial holding company or a national bank with a financial subsidiary fails to continue to meet the applicable “well capitalized” or “well managed” criteria, the financial holding company or national bank must enter into an agreement with the Federal Reserve or the OCC, respectively, that, among other things, identifies how the capital or management deficiencies will be corrected. Until such deficiencies are corrected, the relevant agency may impose limits or conditions on the activities of the company or bank, and the company or bank may not engage in, or acquire a company engaged in, the types of expanded activities only permissible for a financial holding company or financial subsidiary without prior approval of the relevant agency.

In addition, a financial holding company generally may not engage in a new financial activity authorized by the GLB Act, or acquire a company engaged in such a new activity, if any of its insured depository institutions receives a CRA rating of less than Satisfactory rating. A national bank’s financial subsidiary generally may not engage in a new financial activity authorized by the GLB Act, or acquire a company engaged in such a new financial activity, if the national bank or any of its insured depository institution affiliates received a CRA rating of less than Satisfactory.

At December 31, 2018, PNC Bank had an Outstanding rating with respect to the CRA.

Volcker Rule . The Volcker Rule and its implementing regulations prohibit banking entities (as defined by the statute and its implementing regulations) from engaging in short-term trading as principal and having certain ownership interests in and relationships with hedge funds, private equity funds, and certain other private funds (together, “covered funds”), unless an exemption or exception applies. For example, the exemptions under the Volcker Rule allow banking entities to trade as principal for securities underwriting, market making and risk-mitigating hedging purposes, subject to a variety of conditions.

To date, the prohibitions under the final Volcker Rule regulations have not had, and we do not expect them to have in the future, a material effect on our businesses or revenue. However, the conditions for engaging in exempted trading activities and having permissible relationships with a private fund under the regulations could, depending on the agencies’ approach to interpreting them, cause us to forego engaging in hedging or other transactions that we would otherwise undertake in the ordinary course of business and, thus, to some extent, may limit our ability to most effectively hedge our risks, manage our balance sheet or provide products or services to our customers.

The final Volcker Rule regulations impose significant compliance and reporting obligations on banking entities. We have adopted an enterprise Volcker Rule compliance program in accordance with the enhanced compliance program requirements of the agencies’ current regulations. We have also divested prohibited investments in covered funds and received extensions allowing an extended conformance period for our remaining $.1 billion interests in illiquid covered funds (as defined by the applicable requirements).

In 2018, the agencies jointly requested comment on proposed changes to the final Volcker Rule regulations that would, among other things, (i) streamline the compliance program requirements for banking entities (like PNC) that have trading assets and liabilities (excluding trading assets and liabilities involving U.S. government and agency obligations) of more than $1 billion, but less than $10 billion, and (ii) simplify the requirements for engaging in permissible risk-mitigating hedging activities. The proposal also would introduce a new requirement for identifying positions deemed to be held in a trading account which, if adopted as proposed, could have a negative impact on the ability of banking entities (including PNC) to effectively manage risks, make longer-term investments, and seed new funds.

Other Federal Reserve and OCC Regulation and Supervision . The federal banking agencies possess broad powers to take corrective action as deemed appropriate based on the actions, operations or risk management programs of a BHC, an insured depository institution or their subsidiaries, and the Federal Reserve and the OCC have the ability to take enforcement action against PNC and PNC Bank, respectively, to prevent and remedy acts and practices that the agencies determine to be unfair or deceptive. A finding that we have engaged in a deceptive act or practice may have collateral consequences on our ability to rely on certain exemptions, or take advantage of certain provisions of, the securities laws absent a government waiver of such restrictions.

Moreover, less than satisfactory examination ratings, lower capital ratios than peer group institutions, or regulatory concerns regarding management, controls, assets, operations or other factors can all potentially result in practical limitations on the ability of a bank or BHC to engage in new activities, grow, acquire new businesses, repurchase its stock or pay dividends, or continue to conduct existing activities. Furthermore, the OCC has established certain heightened risk management and governance standards for large banks, including PNC Bank, as enforceable guidelines under Section 39 of the Federal Deposit Insurance Act (FDI Act). The guidelines, among other things, establish minimum standards for the design and implementation of a risk governance framework, describe the appropriate risk management roles and responsibilities of front line units, independent risk management, internal audit, and the board of directors, and provide that a covered bank should have a comprehensive written statement that articulates its risk appetite and serves as a basis for the framework. If the OCC determines that a covered national bank is not in compliance with these or other guidelines established under Section 39 of the FDI Act (including the guidelines relating to information security standards), the OCC may require the bank to submit a corrective action plan and may initiate enforcement action against the bank if an acceptable plan is not submitted or the bank fails to comply with an approved plan.

Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s implementing regulation, Regulation W, place quantitative and qualitative restrictions on covered transactions between a bank and its affiliates (for example between PNC Bank, on the one hand, and The PNC Financial Services Group, Inc. and its nonbank subsidiaries, on the other hand). In general, Section 23A and Regulation W limit the total amount of covered transactions between a bank and any single affiliate to 10% of the bank’s capital stock and surplus, limit the total amount of covered transactions between a bank and all its affiliates to 20% of the bank’s capital stock and surplus, prohibit a bank from purchasing low-quality assets from an affiliate, and require certain covered transactions to be secured with prescribed amounts of collateral. Section 23B generally requires that transactions between a bank and its affiliates be on terms that are at least as favorable to the bank as the terms that would apply in comparable transactions between the bank and a third party. Dodd-Frank amended Section 23A of the Federal Reserve Act to include as a covered transaction the credit exposure of a bank to an affiliate arising from a derivative transaction with the affiliate. The Federal Reserve has yet to propose rules to implement these revisions.

The Federal Reserve and the OCC have provided guidance regarding incentive and other elements of compensation provided to executives and other employees at banking organizations they regulate, both as general industry-wide guidance and guidance specific to select larger companies, including PNC. These guidelines are intended to ensure that the incentive compensation practices of covered banking organizations do not encourage excessive risk-taking. The Federal Reserve, the OCC, the FDIC, the SEC and two other regulatory agencies jointly proposed regulations in 2011 and again in 2016 to implement the incentive compensation requirements of Section 956 of Dodd-Frank. Final regulations implementing Section 956 have not been adopted. Regulation of compensation provided by us to our executives and other employees, whether through guidance or rules and regulations, could hamper our ability to attract and retain quality employees.

The Federal Reserve’s prior approval is required whenever we propose to acquire all or substantially all of the assets of any bank, to acquire direct or indirect ownership or control of more than 5% of any class of voting securities of any bank or BHC, or to merge or consolidate with any other BHC. The BHC Act and other federal law enumerates the factors the Federal Reserve must consider when reviewing the merger of BHCs, the acquisition of banks or the acquisition of voting securities of a bank or BHC. These factors include the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the transaction; the effect of the transaction on the financial stability of the United States; the organizations’ compliance with anti-money laundering laws and regulations; the convenience and needs of the communities to be served; and the records of performance under the CRA of the insured depository institutions involved in the transaction.

The Federal Reserve’s prior approval is also required, and similar factors are considered, for a BHC to acquire direct or indirect ownership or control of more than 5% of any class of voting securities of a savings association or savings and loan holding company, or to merge or consolidate with a savings and loan holding company. In cases involving interstate bank acquisitions, the Federal Reserve also must consider the concentration of deposits nationwide and in certain individual states. A BHC is generally prohibited from merging or consolidating with, or acquiring, another company if upon consummation the resulting company would control 10% or more of deposits in the U.S or a state, or if the resulting company’s liabilities would exceed 10% of the aggregate liabilities of the U.S. financial sector (including the U.S. liabilities of foreign financial companies). In extraordinary cases, the FSOC, in conjunction with the Federal Reserve, could order the break-up of financial firms that are deemed to present a grave threat to the financial stability of the United States.

OCC prior approval is required for PNC Bank to acquire another insured bank or savings association by merger or to acquire deposits or substantially all of the assets of such institutions. In deciding whether to approve such a transaction, the OCC is required to consider factors similar to those that must be considered by the Federal Reserve in connection with the acquisition of a bank or BHC. Approval of the OCC and the FDIC is required to merge a nonbank entity into PNC Bank. Our ability to grow through acquisitions or reorganize our operations could be limited by these approval requirements.

Based on the Federal Reserve’s interpretation of the BHC Act, the Federal Reserve has indicated that it considers BlackRock to be a subsidiary of The PNC Financial Services Group, Inc. for purposes of the BHC Act due to PNC’s current and historical ownership interest in, as well as other relationships with, BlackRock and, thus, subject to the supervision and regulation of the Federal Reserve.

FDIC Insurance and Related Matters . PNC Bank is insured by the FDIC and subject to deposit premium assessments. Regulatory matters could increase the cost of FDIC deposit insurance premiums to an insured bank as FDIC deposit insurance premiums are “risk based.” Therefore, higher fee percentages would be charged to banks that have lower capital ratios or higher risk profiles. These risk profiles take into account, among other things, weaknesses that are found by the primary federal banking regulator through its examination and supervision of the bank and the bank’s holdings of assets or liabilities classified as higher risk by the FDIC. A negative evaluation by the FDIC or a bank’s primary federal banking regulator could increase the costs to a bank and result in an aggregate cost of deposit funds higher than that of competing banks in a lower risk category.

Federal banking laws and regulations also apply a variety of requirements or restrictions on insured depository institutions with respect to brokered deposits. For instance, only a “well capitalized” insured depository institution may accept brokered deposits without prior regulatory approval. In addition, brokered deposits are generally subject to higher outflow assumptions than other types of deposits for purposes of the LCR.

Resolution and Recovery Planning . BHCs that have $100 billion or more in assets, such as PNC, are required to periodically submit to the Federal Reserve and the FDIC a resolution plan that includes, among other things, an analysis of how the company could be resolved in a rapid and orderly fashion if the company were to fail or experience material financial distress. The Federal Reserve and the FDIC may jointly impose restrictions on a covered BHC, including additional capital requirements or limitations on growth, if the agencies jointly determine that the company’s plan is not credible or would not facilitate a rapid and orderly resolution of the company under the U.S. Bankruptcy Code (or other applicable resolution framework), and additionally could require the company to divest assets or take other actions if the company did not submit an acceptable resolution plan within two years after any such restrictions were imposed. The FDIC also requires large insured depository institutions, including PNC Bank, to periodically submit a resolution plan to the FDIC that includes, among other things, an analysis of how the institution could be resolved under the FDI Act in a manner that protects depositors and limits losses or costs to creditors of the bank in accordance with the FDI Act. PNC and PNC Bank are required to provide the Federal Reserve and FDIC a public summary of their resolution plans, which the agencies then make available to the public. Depending on how the agencies conduct their review of the resolution plans submitted by PNC and PNC Bank, these requirements could affect the ways in which PNC structures and conducts its business and result in higher compliance and operating costs.

PNC Bank also is subject to OCC guidelines under Section 39 of the FDI Act that establish standards for recovery planning. These guidelines require a covered bank to develop and maintain a recovery plan that, among other things, identifies a range of options that could be undertaken by the covered bank to restore its financial strength and viability should identified triggering events occur. The recovery plan guidelines are enforceable in the same manner as the other guidelines the OCC has established under Section 39 of the FDI Act.

CFPB Regulation and Supervision . The CFPB examines PNC and PNC Bank for compliance with a broad range of federal consumer financial laws and regulations, including the laws and regulations that relate to deposit products, credit card, mortgage, automobile, student and other consumer loans, and other consumer financial products and services that we offer. The consumer financial protection laws that are subject to the CFPB’s supervision and enforcement powers include, among others, the Truth in Lending Act, Truth in Savings Act, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Electronic Funds Transfer Act, Real Estate Settlement Procedures Act, Fair Debt Collections Practices Act, Equal Credit Opportunity Act and Fair Housing Act. The CFPB also has authority to take enforcement actions to prevent and remedy acts and practices relating to consumer financial products and services that it deems to be unfair, deceptive or abusive, and to impose new disclosure requirements for any consumer financial product or service.

The CFPB may issue regulations that impact products and services offered by PNC or PNC Bank. The regulations could reduce the fees that we receive, alter the way we provide our products and services, or expose us to greater risk of private litigation or regulatory enforcement action. The CFPB may engage in rulemakings affecting prepaid cards, data on small business lending, the Home Mortgage Disclosure Act, and payday, vehicle title, and certain high-cost installment loans.

Securities and Derivatives Regulation

Our registered broker-dealer and investment adviser subsidiaries are subject to the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940, respectively, and related rules and regulations promulgated by the SEC. Our investment adviser subsidiary that serves as adviser to registered investment companies is also subject to the requirements of the Investment Company Act of 1940 and related regulations. The Financial Industry Regulatory Authority (FINRA) is the primary self-regulatory organization for our registered broker-dealer subsidiaries. Our broker-dealer and investment adviser subsidiaries also are subject to additional regulation by states or local jurisdictions.

The SEC and FINRA have active enforcement functions that oversee broker-dealers and investment advisers and can bring actions that result in fines, restitution, a limitation on permitted activities, disqualification to continue to conduct certain activities and an inability to rely on certain favorable exemptions. Certain types of infractions and violations also can affect our ability to expeditiously issue new securities into the capital markets. In addition, certain changes in the activities of a broker-dealer require approval from FINRA, and FINRA takes into account a variety of considerations in acting upon applications for such approval, including internal controls, capital levels, management experience and quality, prior enforcement and disciplinary history and supervisory concerns.

In 2018, the SEC issued a package of regulatory proposals that, if finalized, would impact the provision of investment advice to retail customers by registered broker-dealers and investment advisers. Proposed Regulation Best Interest would create a new standard of conduct for broker-dealers making investment recommendations to retail customers. The proposed form would create a new set of disclosure obligations for broker-dealers and investment advisers dealing with retail customers. The SEC has indicated it expects to

adopt final rules later in 2019. If adopted, these rules would primarily impact PNC’s retail broker-dealer/investment adviser, PNC Investments LLC.

Dodd-Frank imposed comprehensive and significant regulations on the activities of financial institutions that are active in the U.S. over-the-counter derivatives and foreign exchange markets. These regulations were intended to (i) address systemic risk issues, (ii) bring greater transparency to the derivatives markets, (iii) provide enhanced disclosures and protections to customers and (iv) promote market integrity. Among other things, Dodd-Frank: (i) requires the registration of both “swap dealers” and “major swap participants” with one or both of the CFTC (in the case of non security-based swaps) and the SEC (in the case of security-based swaps); (ii) requires that most standardized swaps be centrally cleared through a regulated clearing house and traded on a centralized exchange or swap execution facility; (iii) subjects swap dealers and major swap participants to capital and margin requirements in excess of historical practice; (iv) subjects swap dealers and major swap participants to comprehensive new recordkeeping and real-time public reporting requirements; (v) subjects swap dealers and major swap participants to new business conduct requirements, including the provision of daily marks to counterparties and disclosing to counterparties (pre-execution) the material risks, material incentives, and any conflicts of interest associated with their swap; (vi) imposes special duties on swap dealers and major swap participants when transacting a swap with a “special entity” ( e.g. , governmental agency (federal, state or local) or political subdivision thereof, pension plan or endowment); and (vii) imposes margin requirements on swaps that are not centrally cleared through a regulated clearing house.

As a registered swap dealer with the CFTC, PNC Bank's derivatives and foreign exchange businesses are subject to the regulations and requirements imposed on registered swap dealers, and the CFTC (and for certain delegated responsibilities, the National Futures Association) has a meaningful supervisory role with respect to PNC Bank’s derivatives and foreign exchange businesses. Because of the limited volume of our security-based swap activities, PNC Bank has not registered with the SEC as a security-based swap dealer. The regulations and requirements applicable to swap dealers have and will continue to impose compliance burdens on PNC Bank and introduces additional legal risks (including as a result of applicable anti-fraud and anti-manipulation provisions and private rights of action). In addition, failure to comply with the "pay-to-play" regulations that govern our swap and municipal securities businesses could result in limitations on PNC Bank's ability to conduct swap and municipal securities business with state or local governments and their authorities.

BlackRock has subsidiaries in securities and related businesses subject to SEC, other governmental agencies, state, local and FINRA regulation, and a federally chartered nondepository trust company subsidiary subject to supervision and regulation by the OCC. BlackRock describes its regulation by these agencies and otherwise in its filings with the SEC.

Regulations of Other Agencies

In addition to regulations issued by the federal banking, securities and derivatives regulators, we also are subject to regulations issued by other federal agencies with respect to certain financial products and services we offer. For example, certain of our fiduciary, brokerage and investment management activities are subject to regulations issued by the Department of Labor (DOL) under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and related provisions of the Internal Revenue Code and certain of our student lending and servicing activities are subject to regulation by the Department of Education. Certain provisions of final rules issued by the DOL expanding the definition of “investment advice” for retirement accounts and certain other accounts took effect in June 2017. The rules increased the scope of activities that give rise to fiduciary status under ERISA and the Internal Revenue Code and primarily apply to aspects of our Retail Banking and Asset Management Group segments. Certain requirements of the amended rules that had been scheduled to take effect on January 1, 2018 have been delayed until July 1, 2019 and the DOL is expected to propose amendments to the rules during the delay.

Competition

We are subject to intense competition from other regulated banking organizations, as well as various other types of financial institutions and non-bank entities that can offer a number of similar products and services without being subject to bank regulatory supervision and restrictions.

PNC Bank competes for deposits and/or loans with:

In providing asset management services, our businesses compete with:

Our various non-bank businesses engaged in investment banking and alternative investment activities compete with:

Loan pricing, structure and credit standards are extremely important in the current environment as we seek to achieve appropriate risk-adjusted returns. Deposit-taking activities are also subject to pricing pressures and to customer migration as a result of intense competition for deposits and investments. Competitors may seek to compete with us through traditional channels such as physical locations or through digital channels such as internet or mobile. We include here by reference the additional information regarding competition and factors affecting our competitive position included in the Item 1A Risk Factors of this Report.

Employees

Employees totaled 53,063 at December 31, 2018 . This total included 50,928 full-time and 2,135 part-time employees, of which 29,180 full-time and 1,974 part-time employees were employed by our Retail Banking business.

SEC Reports and Corporate Governance Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 (Exchange Act) and, in accordance with the Exchange Act, we file annual, quarterly and current reports, proxy statements, and other information with the SEC. Our SEC File Number is 001-09718.

The SEC maintains an internet website at www.sec.gov that contains reports, including exhibits, proxy and information statements, and other information about issuers, like us, who file electronically with the SEC. You can also inspect reports, proxy statements and other information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our corporate internet address is www.pnc.com and you can find this information at www.pnc.com/secfilings. Shareholders and bondholders may obtain copies of these filings without charge by contacting Shareholder Services at 800-982-7652 or via the online contact form at www.computershare.com/contactus for copies without exhibits, or via e-mail to investor.relations@pnc.com for copies of exhibits, including financial statement and schedule exhibits where applicable. The interactive data file (XBRL) exhibit is only available electronically.

Information about our Board of Directors and its committees and corporate governance, including our PNC Code of Business Conduct and Ethics (as amended from time to time), is available on our corporate website at www.pnc.com/corporategovernance. In addition, any future waivers from a provision of the PNC Code of Business Conduct and Ethics covering any of our directors or executive officers (including our principal executive officer, principal financial officer, and principal accounting officer or controller) will be posted at this internet address.

Shareholders who would like to request printed copies of the PNC Code of Business Conduct and Ethics or our Corporate Governance Guidelines or the charters of our Board's Audit, Nominating and Governance, Personnel and Compensation, or Risk Committees (all of which are posted on our corporate website at www.pnc.com/corporategovernance) may do so by sending their requests to our Corporate Secretary at corporate headquarters at The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2401. Copies will be provided without charge to shareholders.

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “PNC.”

Internet Information

The PNC Financial Services Group, Inc.’s financial reports and information about its products and services are available on the internet at www.pnc.com. We provide information for investors on our corporate website under “About Us – Investor Relations.” We use our Twitter account, @pncnews, as an additional way of disseminating to the public information that may be relevant to investors.

We generally post the following under “About Us – Investor Relations” shortly before or promptly following its first use or release: financially-related press releases, including earnings releases and supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor conference calls or events, and access to live and recorded audio from earnings and other investor conference calls or events. In some cases, we may post the presentation materials for other investor conference calls or events several days prior to the call or event. For earnings and other conference calls or events, we generally include in our posted materials a cautionary statement regarding forward-looking and non-GAAP financial information, and we provide GAAP reconciliations when we include non-GAAP financial information. Such GAAP reconciliations may be in materials for the applicable presentation, in materials for prior presentations or in our annual, quarterly or current reports.

When warranted, we will also use our website to expedite public access to time-critical information regarding PNC instead of using a press release or a filing with the SEC for first disclosure of the information. In some circumstances, the information may be relevant to investors but directed at customers, in which case it may be accessed directly through the home page rather than "About Us - Investor Relations."

We are required to provide additional public disclosure regarding estimated income, losses and pro forma regulatory capital ratios under supervisory and PNC-developed hypothetical severely adverse economic scenarios, as well as information concerning our capital stress testing processes, pursuant to the stress testing regulations adopted by the Federal Reserve and the OCC. We are also required to make certain additional regulatory capital-related public disclosures about our capital structure, risk exposures, risk assessment processes, risk-weighted assets and overall capital adequacy, including market risk-related disclosures, under the regulatory capital rules adopted by the Federal banking agencies. Under these regulations, we may satisfy these requirements through postings on our website, and we have done so and expect to continue to do so without also providing disclosure of this information through filings with the SEC.

Other information posted on our corporate website that may not be available in our filings with the SEC includes information relating to our corporate governance and annual communications from our chairman to shareholders.

Where we have included internet addresses in this Report, such as our internet address and the internet address of the SEC, we have included those internet addresses as inactive textual references only. Except as specifically incorporated by reference into this Report, information on those websites is not part hereof.