KeyCorp (KEY) Risk Factor Changes

We have an enterprise-wide model risk management program designed to accurately identify, measure, report, monitor, and manage model risk.

Some models we use employ methodologies based on artificial intelligence or machine learning.

Companies are also facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their corporate responsibility and sustainability practices and disclosures.

Views about corporate responsibility and sustainability-related issues are differing, dynamic, and rapidly changing.

Differing views on corporate responsibility and sustainability could adversely affect our reputation and our business and results of operations.

correct, may affect our reputation and our business prospects and impact our ability to attract and retain highly skilled employees and customers.

Significant harm to our reputation can arise from various sources, including inappropriate behavior or misconduct of employees, actual or perceived unethical behavior, litigation or regulatory outcomes, inadequate or…

Scotiabank holds approximately 14.9% of our issued and outstanding common shares.

evaluate merger and acquisition and strategic partnership opportunities and conduct due diligence activities related to possible transactions.

The continuous, widespread adoption of new technologies requires us to continually evaluate our product and service offerings to ensure they remain competitive.

Our ability to compete successfully depends on a number of factors, including: our ability to develop and execute strategic plans and initiatives; our ability to develop, maintain, and build long-term client relations…

We face substantial competition in all areas of our operations from a variety of competitors, some of which are larger and may have more financial resources than us.

At the federal level, we are subject to the Gramm-Leach-Bliley Act of 1999, as amended, which requires financial institutions to, among other things, periodically disclose their privacy policies and practices relating…

KeyBank and KeyCorp remain covered institutions under the Dodd-Frank Act’s enhanced prudential standards and regulations, including its provisions designed to protect consumers from financial abuse.

Natural disasters, including wildfires, tornadoes, severe storms, and hurricanes, have seemingly become more frequent and severe.

Our operations and financial performance could be adversely affected by severe weather and natural disasters, both directly and as a result of impacts on our customers.

Our risk management framework seeks to maintain safety and soundness and maximize profitability.

downstream service providers, impacts whether and how we work with such parties, as well as the cost of managing such relationships.

Security attacks can originate from a wide variety of sources/malicious actors, including, but not limited to, persons who constitute an insider threat, who are involved with organized crime, or who may be linked to t…

We also face risks related to the interdependence and interconnectivity of financial entities and technology systems.

We rely on our employees to design, manage, and operate our systems and controls to assure that we properly enter into, record and manage processes, transactions and other relationships with customers, vendors, suppli…

The Federal Home Loan Bank (FHLB) system continues to be a source of secured funding.

Bank failures, such as those that occurred in 2023, have led the U.S.

The federal government’s actions can impact financial markets.

From time to time, federal banking regulators tailor the extent to which various categories of large banks are subject to certain capital, liquidity and other regulations.

In addition, regulatory liquidity standards require us to hold high-quality liquid assets, which has caused us to change, and may in the future cause us to change, our mix of investments in favor of lower-yielding sec…

Capital and liquidity requirements imposed by banking regulators and the credit rating agencies may require banks and BHCs to maintain more and higher quality capital and more and higher quality liquid assets.

Liquidity risk is the danger that a bank may not be able to meet near-term cash demands, such as funding liability maturities and deposit withdrawals, meeting contractual obligations, or funding asset growth and new b…

•An impairment in our ability to liquidate financial positions at acceptable market prices;

•A decrease in consumer and business confidence levels generally, decreasing credit usage and investment or increasing delinquencies and defaults and committed line draws;

In particular, we face the following risks, and other unforeseeable risks, in connection with a downturn in the macroeconomic and financial market environment or other such downside shocks, whether in the United State…

A worsening of economic and financial market conditions or downside shocks could result in adverse effects on Key and others in the financial services industry.

While we have minimal direct foreign company exposure in our loan portfolios, there are correlated and contingent risks posed by geopolitical destabilization within our loan portfolio.

•Labor-supply constraints, including as a result of further changes to U.S.

Present risks to stable asset prices include, but are not limited to:

Although the most recent U.S.

A relatively small portion of our commercial real estate loans are construction loans, with most of these loans utilized to support the construction of affordable housing under the Low-Income Housing Tax Credit (LIHTC…

◦Differing views on corporate responsibility and sustainability could adversely affect our reputation and our business and results of operations.

◦Our operations and financial performance could be adversely affected by severe weather and natural disasters, both directly and as a result of impacts on our customers.

◦Capital and liquidity requirements imposed by banking regulators and the credit rating agencies may require banks and BHCs to maintain more and higher quality capital and more and higher quality liquid assets.

taken, and may in the future take, actions or proposed measures to limit the state’s ability to do business with financial institutions or other businesses identified as discriminating against certain industries or pr…

of our company.

Finally, while remote work opportunities allow us to hire outside of our traditional footprint, it also increases competition.

process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer loans and deposits and related income generated from those products.

KeyBank operates, the time and resources needed for us to comply with such laws and regulations, as well as our potential liability for noncompliance and reporting obligations in the case of data breaches, may signifi…

KeyBank and KeyCorp remain covered institutions under the Dodd-Frank Act’s enhanced prudential standards and regulations, including its provisions designed to protect consumers from financial abuse.

The increase in remote work over the past several years has resulted in an expanded potential attack surface and heightened operational risks and may negatively impact our ability, and the ability of our third-party s…

The increased use of remote work infrastructure has expanded potential attack vectors and resulted in increased operational risks.

Concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts around the world to mitigate those impacts, creating potential transition risk.

Societal and governmental responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

Natural disasters, including wildfires, tornadoes, severe storms, and hurricanes, have seemingly become more frequent and severe due to climate change.

Our risk management framework seeks to maintain safety and soundness and maximize profitability.

Further, as market conditions evolve and respond to the influence of government agency initiatives, or lack thereof, the slope of the yield curve will shift and influence our loan and deposit rates and value of invest…

requirements evolve along with that environment, raising the risk of increased compliance costs in the future.

The most severely impacted commercial real estate segments have been in office.

Recent Federal Reserve monetary policy, including shrinkage of its balance sheet and incremental increases in target interest rates early in 2023 followed by a sustained period of relatively higher target interest rat…

Our ERM program incorporates risk management throughout our organization to identify, understand, and manage the risks presented by our business activities.

◦The increased use of remote work infrastructure has expanded potential attack vectors and resulted in increased operational risks.

◦Societal and governmental responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

governance, establishing and monitoring model control standards and model risk metrics, and completeness and accuracy of the inventory of models.

Negative coverage about Key published in traditional media or on social media websites, whether or not factually

to the extent that the behavior, misconduct, failures, issues, interruptions or actions are pervasive, long-standing or affect a significant number of customers, and particularly retail consumers.

Acquisitions of businesses, such as financial technology companies or investment banking firms, bank branches, or other banks involves various risks commonly associated with acquisitions or partnerships, including exp…

in the financial services industry, or our failure to perform in any of these areas, could significantly weaken our competitive position, which could adversely affect our growth and profitability.

their end-users could adversely affect public opinion of AI and ultimately impair acceptance of AI, including those incorporated into our business and operations.

The models underlying AI that we may leverage, including those developed by third party providers, may be incorrectly or inadequately designed or implemented and trained on, or otherwise use, data or algorithms that a…

We use, and will increasingly use AI, including through third party vendors acting on our behalf and other counterparties, in connection with our business and operations.

Our development and use of AI, including through third parties, exposes us to inherent risks that may adversely impact KeyCorp.

Further, regulatory guidance adopted by federal banking regulators related to how banks select, contract with, evaluate, engage with, and manage their third parties, including such third parties’ use of subcontractors…

subject to human vulnerabilities.

We rely on customer deposits as a low-cost and stable source of funding.

A loss of customer deposits or an adverse change in deposit mix could increase our funding costs and/or impair our liquidity.

rating agency requirements our binding constraint and increasing our capital and/or liquidity costs above what they would otherwise be and potentially reducing our profitability.

To facilitate our wholesale funding and other business activities, we maintain credit ratings with three major credit rating agencies, and their assessments of our capital and liquidity are prominent determinants of o…

•A decrease in the value of collateral, or an increase in the haircuts on that collateral, that we pledge to secure funding and liquidity, reducing the quantum of that funding and/or liquidity;

•The imposition of further tariffs and other changes to U.S.

An inability to grow cash flow or pressure on expenses created by supply chain, insurance, or interest rate increases would result in an increase in the level of payment defaults within the sector, as well as limiting…

at muted levels over the past two years, oversupply of multifamily housing is a concern in certain urban markets.

A large portion of our clients are active in real estate, with most focused on the multifamily space, which has been the best performing real estate sector over the cycle.

After disruptions in 2022 through early 2024 as a result of the increases in the Fed Funds rate and dislocations in the office sector as a result of COVID-19, the commercial and residential real estate markets have re…

◦Our development and use of AI, including through third parties, exposes us to inherent risks that may adversely impact KeyCorp.

◦A loss of customer deposits or an adverse change in deposit mix could increase our funding costs and/or impair our liquidity.