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1Additionally, as a Category III institution, PNC also must, among other things, conduct internal liquidity stress tests over a range of 2time horizons, maintain a buffer of highly liquid assets sufficient to meet projected net cash outflows under the BHC’s 30-day 3liquidity stress test and maintain a contingency funding plan that meets certain requirements.4For additional discussion of regulatory liquidity requirements, refer to the Liquidity and Capital Management portion of the Risk 5Management section of this Report.6Source of Parent Company Liquidity and Dividends. The principal source of our liquidity at the parent company level is dividends and 7other capital distributions from PNC Bank. PNC Bank is subject to various restrictions on its ability to pay dividends to PNC Bancorp, 8Inc., its direct parent, which is a wholly-owned direct subsidiary of The PNC Financial Services Group, Inc. PNC Bank also is subject 9to federal laws limiting extensions of credit to its parent holding company and non-bank affiliates as discussed in Note 19 Regulatory 10Matters. Further information on bank level liquidity and parent company liquidity is also available in the Liquidity and Capital 11Management portion of the Risk Management section of this Report.12Federal Reserve rules provide that a BHC is expected to serve as a source of financial strength to its subsidiary banks and to commit 13resources to support such banks if necessary. Dodd-Frank requires that the Federal Reserve jointly adopt new rules with the OCC and 14the FDIC to implement this source of strength requirement. These joint rules have not yet been proposed. Consistent with this source 15of strength policy for subsidiary banks, the Federal Reserve has stated that, as a matter of prudent banking, a BHC generally should 16not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the 17dividends and the prospective rate of earnings retention appears to be consistent with the corporation’s capital needs, asset quality and 18overall financial condition. Further, in providing guidance to the large BHCs participating in the CCAR exercise, such as PNC as 19discussed above, the Federal Reserve has expected capital plans to reflect conservative dividend payout ratios. 20Enhanced Prudential Requirements. Under Federal Reserve rules, PNC and other BHCs with total consolidated assets of $100 billion 21or more are subject to various enhanced prudential standards related to liquidity risk management and overall risk management. For 22PNC, these rules, among other things, establish liquidity stress testing requirements (discussed above), limitations on PNC’s aggregate 23net credit exposures to any single, unaffiliated company (referred to as SCCL), and certain oversight and governance responsibilities 24for PNC’s Chief Risk Officer, the Board of Directors, and the Risk Committee of the Board of Directors. Under the Federal Reserve’s 25SCCL rules, PNC’s aggregate net credit exposure (including exposure resulting from, among other transactions, extensions of credit, 26repurchase and reverse repurchase transactions, investments in securities and derivative transactions) to any unaffiliated counterparty 27may not exceed 25% of PNC’s Tier 1 capital. 28The Federal Reserve may continue to develop the set of enhanced prudential standards that apply to large BHCs in order to further 29promote the resiliency of such firms and the U.S. financial system. For additional information, see Item 1A Risk Factors of this 30Report.31Additional Powers Under the GLB Act. The GLB Act permits a qualifying BHC, such as PNC, to become a “financial holding 32company” and thereby engage in, or affiliate with companies engaging in, a broader range of financial activities than would otherwise 33be permitted for a BHC. Permitted affiliates include securities underwriters and dealers, insurance companies, insurance agents and 34companies engaged in other activities that are determined by the Federal Reserve, in consultation with the Secretary of the Treasury, to 35be “financial in nature or incidental thereto” or are determined by the Federal Reserve unilaterally to be “complementary” to financial 36activities. We became a financial holding company in 2000. A BHC qualifies to become a financial holding company if the BHC and 37its subsidiary depository institutions are “well capitalized” and “well managed” and its subsidiary depository institutions have a rating 38under the CRA of “Satisfactory” or better. Among other activities, we currently rely on our status as a financial holding company to 39conduct merchant banking activities and securities underwriting and dealing activities. As subsidiaries of a financial holding company 40under the GLB Act, our non-bank subsidiaries are generally allowed to conduct new financial activities, and we generally are 41permitted to acquire non-bank financial companies that have less than $10 billion in assets, with after-the-fact notice to the Federal 42Reserve.43In addition, the GLB Act permits qualifying national banks to engage in expanded activities through a “financial subsidiary.” PNC 44Bank has filed a financial subsidiary certification with the OCC and currently engages in insurance agency activities through financial 45subsidiaries. PNC Bank may also generally engage through a financial subsidiary in any activity that is determined to be financial in 46nature or incidental to a financial activity by the Secretary of the Treasury, in consultation with the Federal Reserve (other than 47insurance underwriting activities, insurance company investment activities and merchant banking). In order to establish a financial 48subsidiary, a national bank and each of its depository institution affiliates must be “well capitalized” and “well managed” and the 49national bank and each of its depository institution affiliates must have a CRA rating of “Satisfactory” or better.50If a financial holding company or a national bank with a financial subsidiary fails to continue to meet the applicable “well capitalized” 51or “well managed” criteria, the financial holding company or national bank must enter into an agreement with the Federal Reserve or 52the OCC, respectively, that, among other things, identifies how the capital or management deficiencies will be corrected. Until such 53 54The PNC Financial Services Group, Inc. –  2023 Form 10-K  7