Charles Schwab (SCHW) Risk Factor Changes

New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds…

Regulators have broad discretion in connection with their supervisory and enforcement activities and examination policies, and could prevent us from pursuing our business strategy.

When clients purchase securities on margin, borrow on lines of credit collateralized by securities, or trade options or futures, we are subject to the risk that clients may default on their obligations when the value…

Our businesses are subject to the risk that a client, counterparty or issuer will fail to perform its contractual obligations, or that the value of collateral held to secure obligations will prove to be inadequate.

We continue to take steps to implement new controls, strengthen capabilities in how we authenticate our clients, and enhance monitoring protocols to help prevent and detect fraud and ultimately protect our clients, bu…

We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, support, and custody functions.

systems, linkages with third-party systems and power failures and can have a significant impact on our business and operations.

Security breaches, including breaches of our security measures or those of our third-party service providers, could result in a violation of applicable privacy and other laws, and could subject us to significant liabi…

Our business involves the secure processing, storage, and transmission of confidential information about our clients and us.

As a participant in the financial services industry, Schwab relies on access to external financing in the normal course of business.

As a member firm of securities and derivatives clearing houses, we are required to deposit cash, stock and/or government securities for margin requirements and to clearing funds.

Factors which may adversely affect our liquidity position include CS&Co having temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash ba…

Problems encountered by other financial institutions and responsive measures to manage such problems could have direct adverse effects on financial markets generally and our financial position or results of operations…

A rise in interest rates may also reduce our bank deposit account fee revenue, as clients may reallocate assets out of bank deposit account balances and into higher-yielding investment alternatives, as we experienced…

Though the Company may benefit from a rising interest rate environment, a rise in interest rates may cause our funding costs to increase.

Client cash balances are a significant funding source for the generation of the Company’s revenue.

The monetary policies of the Federal Reserve, which regulates the supply of money and credit in the United States, have a significant effect on our operating results.

We face a variety of risks that may affect our operations, financial results, or stock price and many of those risks are driven by factors that we cannot control or predict.

We rely on financial intermediaries to execute and settle client orders and transactions with financial intermediaries are a significant source of revenue.

We rely on outsourced service providers to perform key functions.

We also face risk related to external fraud involving the misappropriation and use of clients’ user names, passwords or other personal information to gain access to our clients’ financial accounts.

investigate and remediate vulnerabilities or other exposures.

When short-term interest rates rapidly increase, as they did in 2022 and 2023, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases.

activities (including margin, mortgage-related, and personal lending), increased capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or client confide…

securities portfolios.

For a discussion of our risk management governance and processes, including operational risk, compliance risk, credit risk, market risk, and liquidity risk, see Risk Management and Capital Management in Part II – Item 7.

We expect to engage with third-party service providers to facilitate certain activities related to digital assets.

the permanent loss of digital assets with no practical means of recovery.

Digital assets function as bearer instruments controlled with private keys, and transactions in digital assets are generally irreversible.

In 2026, the Company anticipates it will begin offering expanded client access to trading in digital assets including spot trading in select cryptocurrencies.

We intend to offer clients direct access to select digital assets, which exposes us to new and uncertain financial, operational, legal, and regulatory risks that could adversely affect our business and financial results.

or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.

financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the Company sponsors.

We also face risks arising from clients who intentionally engage in fraudulent or deceptive conduct.

The risk of fraud for financial institutions has significantly increased in recent years, in part because of the proliferation of new technologies and the increased sophistication and activities of organized crime and…

We may suffer financial loss from fraud and financial crime.

health crises, political developments, war, international disputes, or for any other reason, and our inability to make alternative arrangements in a timely manner could disrupt our operations, impact our ability to of…

We rely on outsourced service providers and financial intermediaries to perform key functions, and failure of these entities to perform as expected could result in financial or reputational harm to us or financial har…

We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our sy…

When short-term interest rates rapidly increase, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases.

deposit additional funds.

than the net interest revenue that we could have earned if the deposit balances were used to extend margin loans or swept to our banking subsidiaries rather than the TD Depository Institutions.