1. TAX UPDATE FROM WASHINGTON Adrian Fenton, Bill Reilly, Banking Industry Tax Leader Mel Schwarz, Partner, National Tax Standards GroupNovember 2013

2. Agenda Where's My Tax Reform? Implications for the Banking Industry What's Next? Grant Thornton LLP. All rights reserved.2 3. Today's speakersAdrian Fenton U.S. Tax Services Director, Asset Servicing Bank of New York Mellon T: 412-234-4310 E: adrian.r.fenton@bnymellon.com Grant Thornton LLP. All rights reserved.Bill Reilly Banking Industry Tax Leader Grant Thornton LLP T: 212-624-5420 E: bill.reillyl@us.gt.comMel Schwarz Partner, Director of Tax Legislative Affairs Washington National Tax Office Grant Thornton LLP T: 202-521-1564 E: mel.schwarz@us.gt.com3 4. Where's My Tax Reform Competitive impetus for tax reform The U.S. is out of step with its trading partners. Our 35% statutory corporate rate exceeds the OECD average of 25.1% Most of our trading partners use an essentially territorial, rather than a worldwide, system of taxation These differences are seen to: put U.S. multinationals at a competitive disadvantage compared to those of other nations discourage free flow of capital into the U.S. Grant Thornton LLP. All rights reserved.4 5. Combined Corporate Income Tax RateCombined Corporate Income Tax Rate (Includes State and Local)United States 39%OECD Average 25% Grant Thornton LLP. All rights reserved.5 6. Impact of High Statutory Corporate Tax Rates Why is this a problem for U.S. Multinationals? Discourages repatriation of foreign profits Real and Financial statement penalties Encourages offshoring of productive assets, particularly intangibles Encourages offshore creation of intangible assets Discourages U.S. manufacture of products for export Creates unnecessary pressure on transfer pricing Grant Thornton LLP. All rights reserved. 7. Where's My Tax Reform? Political and economic impetus for tax reform Taxed Enough Already Taxes need to contribute to reducing the deficit Static view We need more tax revenue to cover government spending Dynamic view We need a more efficient tax system to increase business profits which will in turn increase revenues Grant Thornton LLP. All rights reserved. 8. Grant Thornton LLP. All rights reserved. 9. Federal Debt Held by the Public Percentage of Gross Domestic Product Grant Thornton LLP. All rights reserved. 10. Current U.S. Federal Deficit ProjectionsSource: Congressional Budget Office Grant Thornton LLP. All rights reserved. 11. Where's My Tax Reform? So What Happened? Partisan Politics "There's no doubt we need more revenue" President Obama, Feb 3 "The president got his tax hikes on January 1. The talk about raising revenue is over." House Speaker John Boehner, March 17 Grant Thornton LLP. All rights reserved. 12. Where's My Tax Reform? So What Happened? Lack of leadership (other than Camp and Baucus) Congressional leaders had other priorities President not fully engaged Reality caught up with desire Grant Thornton LLP. All rights reserved. 13. Where's My Tax Reform Desire and Reality DESIRE - The blueprint for tax reform Reduce corporate and individual rates to 25% Do not change distribution of burden Revenue Neutral business and individual foreign and domestic Dynamic improvements through greater efficiency Grant Thornton LLP. All rights reserved. 14. How do you pay for tax reform? Major domestic business tax expenditures Grant Thornton LLP. All rights reserved. 15. How do you pay for tax reform? Major individual tax expenditures700 600EmployerHealth500Pensions MortgageInterest400CapitalGains&Dividends300EarnedIncomeCredit200 100 0 Grant Thornton LLP. All rights reserved.StateTaxes StepupatDeath UntaxedSocialSecurity 16. Banking and Finance Issues in Tax Reform House Discussion Draft Mark-to-market derivatives at the end of the year, with gain taxed as ordinary Hedges determined by financial accounting Debt modifications not C.O.D. income Discount on short term gvt. bonds not current income Average basis on sale of securities Grant Thornton LLP. All rights reserved. 17. Banking and Finance Issues in Tax Reform Senate Staff Discussion Draft Change taxation of carried interests Change relationship of dividends and interest Modify income treatment of interest and dividends Various integration options Domestic interest and foreign earnings defer interest until income repatriated expand thin capitalization rules (25% standard?) Grant Thornton LLP. All rights reserved. 18. Banking and Finance Issues in Tax Reform Senate Staff Discussion Draft Modify tax rules for derivatives and other investments treat all income as ordinary base treatment on underlying investment expand mark-to-market requirements expand hedging definition limit changes to actively traded derivatives Grant Thornton LLP. All rights reserved. 19. Grant Thornton LLP. All rights reserved. 20. Discussion Question WHERE DOES THIS LEAVE BANKING AND CAPITAL MARKETS? Grant Thornton LLP. All rights reserved. 21. What's Next?DEBT CEILING Grant Thornton LLP. All rights reserved. 22. Contact today's speakersAdrian Fenton U.S. Tax Services Director, Asset Servicing Bank of New York Mellon T: 412-234-4310 E: adrian.r.fenton@bnymellon.com Grant Thornton LLP. All rights reserved.Bill Reilly Banking Industry Tax Leader Grant Thornton LLP T: 212-624-5420 E: bill.reillyl@us.gt.comMel Schwarz Partner, Director of Tax Legislative Affairs Washington National Tax Office Grant Thornton LLP T: 202-521-1564 E: mel.schwarz@us.gt.com22 23. Document content is not intended to answer specific questions or suggest suitability of action in a particular case. For additional information on the issues discussed in this document, consult your Grant Thornton client-service professional. The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity. In the U.S., visit Grant Thornton LLP at www.GrantThornton.com. Grant Thornton LLP. All rights reserved.