SCHWCharles Schwab Corporation

We note that you state that management uses Economic Value of Equity to measure interest rate risk. However, you do not present any quantitative or qualitative analysis of your EVE during the period, nor the key assumptions that management uses to evaluate and manage exposure to this risk. Provide us with your analysis supporting your decision not to provide information related this measure of market risk.

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Please refer to Item 305 of Regulation S-K. Also, revise your disclosure to address the key metrics management uses in evaluating EVE to manage your exposure to market risk, and explain any significant changes made as a result of monitoring EVE in reducing your exposure to market risk.

Schwab utilizes multiple approaches to manage interest rate risk, which are described on pages 50-51 of the 2022 Form 10-K. Thus, while management monitors changes in economic value of equity (EVE) sensitivity over time, EVE is only one factor taken into consideration in the management of market risk. As disclosed, the Company utilizes interest rate risk simulations, including net interest revenue and EVE simulations.

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The Company believes that the disclosure regarding net interest revenue simulations are particularly useful and satisfy the quantitative disclosure requirements of Item 305 of Regulation S-K. The results of the net interest revenue simulation sensitivity analyses provide an easily understandable number – that is, the simulated impacts to net interest revenue. In addition, the modeling, assumptions, and parameters employed in the net interest revenue simulations are, by definition, relatively consistent from period-to-period and thus allow for comparisons of that number over time.

We believe that disclosing qualitative information regarding our use of EVE also provides helpful information regarding the Company’s interest rate risk management program. We disclosed in our 2022 Form 10-K that in the management of interest rate risk we establish limits on net interest revenue risk and EVE risk, and to remain within these limits, we manage the maturity, repricing, and cash flow characteristics of the investment portfolios. We stated further that management monitors established guidelines to stay within the Company’s risk appetite. We also presented our key assumptions in our EVE calculation in the 2022 Form 10-K and 2023 Form 10-Qs: specifically, projection of interest rate scenarios with rate floors, prepayment speeds of mortgage-related investments, term structure models of interest rates, non-maturity deposit behavior, and pricing assumptions.

EVE is dependent on model assumptions under a variety of market and economic environments, as discussed on page 51 of the 2022 Form 10-K. The simplicity of the result (i.e., discounted value of net cash flows) belies the dependency of the calculation on assumptions and model inputs. With these extensive model dependencies and the reality of ongoing adjustments in the modeling often from quarter to quarter as we have additional experience with rate environments, understanding changes in modeled EVE and the practical implications can be difficult, and comparability of EVE across periods and among financial firms may not be useful to investors.

Conversations with the investment community indicate that they don’t focus on EVE in their evaluation of the Company’s risk profile and sensitivity to changes in rates, preferring instead quantification of net interest revenue sensitivity. Investors have, however, inquired about other related information that Schwab has either historically disclosed or recently began disclosing (e.g., effective duration), including trends and drivers related to net interest revenue and balance sheet management. In consideration of these and other factors, the Company has historically chosen to present only qualitative information regarding the Company’s use of EVE in managing interest rate risk.

Particularly in light of the banking industry turmoil that occurred in the first quarter of 2023, the Company carefully considered its disclosures related to market risk and liquidity risk, and expanded certain disclosures beginning in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Q1 2023 Form 10-Q”), including those related to interest rate risk management. Beginning in the first quarter of 2023, the Company added disclosures regarding effective duration of components of its balance sheet (see page 16 of our Q1 2023 Form 10-Q), which had become a topic of greater interest with investors. We believe this supplemental disclosure provides additional information for investors regarding the Company’s management of interest rate risk and enables more useful comparisons over time and across firms. Also beginning in our Q1 2023 Form 10-Q, the Company supplemented its qualitative disclosures regarding its interest rate risk simulations and enhanced many disclosures regarding liquidity and changes in its mix of funding sources, including in pages 16-19.

We will continue to evaluate the Company’s disclosures related to interest rate risk management, and will continue to evaluate in future filings the potential need for additional or modified disclosures based on the facts and circumstances present at such time.

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We note the disclosure that beginning in 2023, you began to utilize interest rate swap derivative instruments to assist with managing interest rate risk; however, we do not see fulsome disclosure discussing and quantifying the use of derivatives used to manage your interest rate risk.

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Please provide a qualitative discussion of how derivatives are used to manage interest rate risk, including the volume and types of derivatives and any additional details regarding the changes in strategy during the periods presented. See Item 305(b)(1)(ii) of Regulation S-K. Additionally, consider disclosing quantitative information about the impact the use of derivatives had on managing your interest rate risk and clarify whether the disclosed outputs from your NIR and EVE simulation reflect the impact of any derivatives used to manage interest rate risk.

In 2023, the Company began to utilize interest rate swaps as part of its interest rate risk management program, and include these derivative instruments in its interest rate risk simulations. As the program began in early 2023, the impact of the use of derivative instruments on the Company’s management of interest rate risk was not material through June 30, 2023.

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As a result, the Company did not provide disclosures regarding the impact of the use of derivative instruments in its management of interest rate risk.

In the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Q2 2023 Form 10-Q” and together with the Q1 2023 Form 10-Q, the “2023 Form 10-Qs”), Schwab provided in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (“Item 1”) Note 11 Derivative Instruments and Hedging Activities (“Note 11”) discussion of the types of derivatives used by the Company as well as quantitative information to provide investors with an understanding of the sizing and effects of our derivative instruments. As part of the market risk disclosures, on page 18 of the Q2 2023 Form 10-Q, the Company provided a cross reference to Note 11 to avoid duplication of certain disclosures. Note 11 also provides cross references to other footnotes that provide additional disclosure related to our derivative instruments, including to Item 1 – Note 2 Summary of Significant Accounting Policies and New Accounting Standards which provides further discussion of the Company’s accounting for such derivatives.

As part of our disclosure in Note 11, the following statement referenced the size of our outstanding derivative instruments used for interest rate risk management: “The Company had outstanding interest rate swaps with aggregate notional amounts of $8.9 billion at June 30, 2023 that were designated as fair value hedges of interest rate risk.” Note 11 also discloses that the Company’s only outstanding derivative instruments used for hedging purposes as of June 30, 2023 were fair value interest rate swaps on available for sale (AFS) securities. The notional amount of derivative instruments outstanding represented approximately 7% of the $136.9 billion total amortized cost of the Company’s AFS investment securities as of June 30, 2023. Note 11 also disclosed that the impact of our interest rate swaps was $122 million for the six months ended June 30, 2023, or approximately 2% of net interest revenue, though due to the application of hedge accounting, the net impact to net interest revenue of our interest rate risk management (i.e., the combined impact of the interest rate swaps and the hedged AFS securities) was less than $1 million for the six months ended June 30, 2023. In sum, we believe our disclosure clearly shows that the impact of the Company’s use of derivative instruments during the respective periods was immaterial.

In future filings, the Company will clarify that our interest rate risk simulations include the impact of derivative instruments, and additional disclosure will be provided to the extent the impacts of our use of derivative instruments become material to our interest rate risk management program and financial results.

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We also note that key assumptions in your interest rate sensitivity analysis include the projection of interest rate scenarios with rate floors, rates and balances of non-maturity client cash held on the balance sheet, prepayment speeds of mortgage-related investments, repricing of financial instruments, and reinvestment of matured or paid-down securities and loans.

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Please revise your disclosures in future filings to describe and define the various identified assumptions, whether you use proprietary or third-party data, how the data are used in your modeling and any unique facts and circumstances about them, such as how they have or may respond to unknown facts and circumstances, such as exogenous events. Additionally, please disclose changes in any assumptions used for any comparative period, including changes to the data source used or significant changes in the actual assumption itself due to, and for example, internal data, market conditions or significant changes in the judgments and determinations made by management as you refine your modeling over time. Please see Item 305(a)(1)(ii)(B) of Regulation S-K.

In addition to the portion of our interest rate sensitivity analysis disclosures referenced in the Staff’s comment, we note that we have provided extensive additional disclosure in the subsequent paragraphs on pages 18-19 of the Company’s Q2 2023 Form 10-Q regarding, among other items: the significant components of the Company’s interest-earning assets and interest-bearing liabilities; internal and external factors that influence interest rates on our interest-earning assets and interest-bearing liabilities, including hypothetical directional movement variations in interest revenue compared

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with interest expense as a result of market interest rate fluctuations; limitations of the simulations such as the use of a statically sized balance sheet; and factors such as those recently experienced in the rising interest rate environment and the Company’s current reliance on higher-cost funding sources.

In regard to changes in assumptions used for comparative periods, the Company has also provided on pages 18-19 of the Company’s Q2 2023 Form 10-Q discussion of material drivers of the changes in net interest revenue sensitivity for comparative periods, including commentary regarding internal and external factors, which, for the periods presented, primarily related to changes in the size and composition of the balance sheet and market interest rates. The Company also included quantitative historical disclosure of interest-earning assets and funding sources as a component of MD&A (see pages 9-10 of the Company’s Q2 2023 Form 10-Q), which provide additional insight into factors influencing the Company’s net interest revenue.

In future filings, the Company will clarify its use of proprietary or third-party data in its interest rate sensitivity analysis and will evaluate the potential need for other modification to the disclosure based on the facts and circumstances present at such time.

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In your 10-K you state that the Chief Risk Officer, Global Risk Committee and its subcommittees, and the Board Risk Committee have significant roles in monitoring and providing oversight for risk management and responding to emerging risks.

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We also note that during 2023, you have seen significant fluctuations in the composition of your funding sources as clients have moved away from keeping money in your deposit products, and seen a decline in your net interest revenue. We also note the statement in the press release furnished as an exhibit to the April 17, 2023 Form 8-K attributing the reduction in deposit volumes to your clients' preference for other products within the Schwab family. Revise your disclosure in future filings to discuss the roles of your risk management oversight process in identifying and addressing changes to the mix of Schwab products held by your clients during the reported period. Discuss any instances where the relevant committee or sub-committee had to approve a change in order to maintain compliance with your established risk profile, or accepted an increased risk exposure compared to your tolerances set before the Federal Reserve began increasing rates and your clients allocation preferences changed. Also, disclose how the Committees and the rest of your oversight process distinguish between changes in client preferences among your products and a more fundamental move away from Schwab products and any significant actions taken as a result of that evaluation during the reported period. For instance, discuss management's actions in response to deposit outflows on your ability to maintain sufficient capital adequacy for both the parent company and your banking subsidiary to avoid restrictions in your ability to access funding sources including advances or brokered deposits.

Schwab’s risk management oversight process has focused on identifying and addressing changes to our funding sources that result from changes to the mix of Schwab products held by our clients. As we have disclosed, Schwab’s primary funding source is cash generated by client activity which includes bank deposits and cash balances in client brokerage accounts. As part of our risk management oversight process, we monitor and forecast cash balances to ensure sufficient liquidity in relation to changes in deposits and to support management of our investment portfolios and capital.

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The significance of deposit balances in the Company’s management of liquidity and market risk and capital management is discussed in detail in the Company’s 2022 Form 10-K, primarily in MD&A – Risk Management (pages 46-56), and in its Q1 2023 Form 10-Q (pages 14-19) and Q2 2023 Form 10-Q (pages 18-24). We employ a variety of metrics to monitor and manage liquidity, including evaluating current and forecasted deposit flows. We conduct regular liquidity stress testing to ensure our ability to maintain sufficient liquidity to meet operational needs and satisfy applicable regulatory requirements and in the oversight of market and capital risk under both normal and stressed conditions. Results of liquidity stress testing are reported through management level risk committees and to the Board of Directors. A number of early warning indicators are monitored to help identify emerging liquidity stresses in the market or within the organization and are reviewed with management. In addition, the discussion about Market Risk in MD&A – Risk Management (pages 50-51 in our 2022 Form 10-K, and pages 18-20 in our Q2 2023 Form 10-Q) includes extensive detail about the impact of deposit flows to interest rate risk simulations.

The Company has also disclosed trends and uncertainties relating to these risks in its filings. Client cash allocations are heavily influenced by the interest rate environment and other market dynamics. As described in our 2022 Form 10-K and 2023 Form 10-Qs, during 2022 and 2023, the magnitude and speed of short-term interest rate increases exceeded market expectations and related client cash movements out of deposits and into higher yielding cash and fixed income alternatives exceeded forecasts. As these outflows outpaced excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, our banking subsidiaries utilized higher cost supplemental funding sources which negatively impacted our net interest revenue. As clients reallocated cash to money market funds in 2022 and 2023, the Company’s asset management and administration fee revenue increased, though in the second quarter of 2023, the increase was more than offset by lower net interest revenue.

The Company did not adjust its business model and risk tolerance as the Federal Reserve began and continued to increase interest rates and as our clients’ preferences changed to allocate sweep deposit and brokerage cash to higher-yielding investments. Nor was there ever any decision or consideration (other than the issuance of certificates of deposit, which we disclosed) to change the product mix we offer to our clients. As discussed in our 2022 Form 10-K, our risk appetite is defined as the amount of risk the Company is willing to accept in pursuit of our corporate strategy. This risk appetite is developed by executive management and approved by the Board of Directors and reflected in specific risk limits. As disclosed in our 2022 Form 10-K, the Global Risk Committee is responsible for the Company’s risk management and the Financial Risk Oversight Committee provides oversight of and approves credit, market, liquidity, and capital risk policies, limits, and exposures, escalating any key items to the Global Risk Committee.

The Company notes, as disclosed in the 2022 Form 10-K and the 2023 Form 10-Qs that its loans and securities have low credit risk, which was by design and due to its longstanding risk appetite. Because of the low credit risk the Company has an expectation of full-principal recovery for both loans and securities and, therefore, liquidity risk is the primary risk being evaluated in relation to loans and securities. As defined and disclosed in our 2022 Form 10-K, “liquidity risk is the potential that Schwab will be unable to sell assets or meet cash flow obligations when they come due without incurring unacceptable losses.” The Company determined that it had sufficient liquidity from its diversified liquidity sources to hold its securities and loans until maturity or not sell them and realize the unrealized losses due to changes in interest rates.

4.(Continued) Also, disclose how the Committees and the rest of your oversight process distinguish between changes in client preferences among your products and a more fundamental move away from Schwab products and any significant actions taken as a result of that evaluation during the reported period.

Response:

As noted above, during the current rising interest rate environment the Company’s risk committees and risk processes have focused on the impact to Schwab’s funding sources from client behavior in response to rising interest rates and other fixed income and equity market dynamics, which primarily manifested in deposit outflows to invest in higher-yielding investment products driven by the rapid increase in interest rates. The Company’s bank deposits decreased $139.4 billion, or 31%, from December 31, 2021 to June 30, 2023. As we discussed extensively in our 2022 Form 10-K and 2023 Form 10-Qs, these changes in client cash activity were driven by our clients responding to the rising interest rate environment rather than movement away from Schwab products more generally.

This trend and corresponding impacts are evident through consideration of Schwab’s business overall. The Company discloses a number of metrics that provide indications of client engagement with the Company and allocation of client cash among our other products. As several examples, we note the following for the 18-month period from December 31, 2021 through June 30, 2023:

•During 2022 and the first six months of 2023, the Company gathered net new client assets totaling $629.6 billion.

•From December 31, 2021 to June 30, 2023, our clients’ balance of Schwab’s money market funds increased by $246.4 billion, or 168%, and client balances of fixed income securities increased by $366.2 billion, or 103%.

•From December 31, 2021 to June 30, 2023, total client assets decreased $122.2 billion, or 2%, due to offsetting net market losses, while total active brokerage accounts increased 1.2 million, or 4%, and banking accounts increased 167,000, or 10%.

The Company evaluated these metrics and a number of other indicators in regard to the Company’s disclosure that client cash activity in 2022 and 2023 was due to clients’ response to the rising interest rate environment to invest in higher-yielding investment products within Schwab rather than a “fundamental move away from Schwab products”.

4.(Continued) For instance, discuss management’s actions in response to deposit outflows on your ability to maintain sufficient capital adequacy for both the parent company and your banking subsidiary to avoid restrictions in your ability to access funding sources including advances or brokered deposits.

Response:

The Company took a number of actions to address its risk profile and changes to the environment, consistent with its disclosed liquidity and capital management policies and processes, including the following, which were disclosed in the Company’s 2022 Form 10-K and 2023 Form 10-Qs:

•In January and November 2022, Schwab transferred investment securities from the AFS category to the held to maturity (HTM) category with aggregate fair values of $108.8 billion and $79.8 billion, respectively. We disclosed in our 2022 Form 10-K that the transfer of these securities to the HTM category “reduces the Company’s exposure to fluctuations in accumulated other comprehensive income (AOCI) that can result from unrealized gains and losses on AFS securities due to changes in market interest rates.”

◦In the 2022 Form 10-K and 2023 Form 10-Qs we disclosed the requirement that our banking subsidiaries maintain positive tangible capital to allow access to Federal Home Loan Bank (FHLB) advances and noted that our capital management considers minimum tangible capital ratios. These transfers of securities from AFS to HTM reduced the volatility in our tangible capital.

•In the fourth quarter of 2022, the Company began to issue brokered certificates of deposit and utilize FHLB advances as an alternative source of funding to replace deposit outflows that were occurring. Additional issuances of certificates of deposit and FHLB borrowings subsequent to December 31, 2022 were also disclosed in the 2022 Form 10-K.

•In the first quarter of 2023, the Company pledged additional securities to the Federal Reserve to ensure capacity was available should additional sources of liquidity be needed. The Company also disclosed other securities available to pledge to further increase access to lending facilities. In the Company’s Q1 2023 Form 10-Q, the Company again disclosed borrowings from the FHLB, brokered certificates of deposit issued, and repurchase agreements utilized subsequent to March 31, 2023.

•In 2023, the Company began establishing and utilizing new repurchase facilities available to our banking subsidiaries (e.g., the standing repo facility with the Federal Reserve Bank of New York) and our parent entity, The Charles Schwab Corporation, further increasing the diversity of funding sources.

•While not material in the first two quarters of 2023, the Company began utilizing interest rate derivatives as part of its interest rate risk management.

•In the first quarter of 2023, the Company suspended share repurchase activity and disclosed that it was accreting capital given anticipation of changing regulatory expectations and capital requirements. In the second quarter of 2023, after the proposed rules applicable to large banking organizations were released on July 27, 2023, the Company added a non-GAAP financial measure to adjust its Tier 1 Leverage Ratio to show the effect of including AOCI in the ratio as a supplemental measure of the Company’s capital levels.

•In the second quarter of 2023, the Company issued $2.5 billion of senior unsecured notes and contributed capital to its banking subsidiaries.

We will continue to evaluate in future filings the potential need for additional or modified disclosures based on the facts and circumstances present at such time, including with respect to enhancements in deposit monitoring and forecasts incorporated in liquidity and market risk management and capital management.

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You discuss changes that you have made to your funding sources, including the sale of additional long term debt, issuing brokered deposits and FHLB advances. We also note that the debt rating for your long term debt was lowered by at least one rating agency.

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Revise your disclosure in future filings to address any material impact from changing the mix of funding sources, including the increase in interest and other expenses associated with those funding sources as well as any change in duration. Also, disclose any material regulatory implications from choosing those funding sources, including any impact on your ability to rely on the source in the event that you or your banking subsidiary were to face capital adequacy concerns.

With the rapid increases in short-term interest rates beginning in early 2022, we have provided increasingly detailed disclosures in our 2023 Form 10-Qs and the 2022 Form 10-K regarding the impacts on our financial condition and results of operations. With our increased use of FHLB and other short-term borrowings beginning in the fourth quarter of 2022, we have provided quantitative and qualitative disclosures around the sizing and impacts of our use of supplemental funding (including FHLB borrowings, other short-term borrowings, and brokered certificates of deposit).

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Such disclosures have included ending and average balances of borrowings, weighted average interest rates, maturities, and related cash flow impacts.

We note that the Company frequently issues long-term debt in a variety of market conditions. However, as the Company’s use of higher cost supplemental funding increased in the first and second quarters of 2023, we provided extensive additional disclosures to enable users of the financial statements to understand the impacts of such borrowings. We refer the Staff to the following relevant disclosures made in the Company’s Q2 2023 Form 10-Q that discuss the impacts of the use of higher-cost supplemental funding sources (we note that the Company also included similar disclosures in its Q1 2023 Form 10-Q corresponding with increased use of higher cost supplemental funding sources):

•MD&A – Overview, pages 5-6 which discuss overall drivers of changes in net interest revenue as well as balance sheet management, including disclosure of the use of supplemental funding sources as a result of clients’ allocation of assets to higher yielding cash and fixed income alternatives.

•MD&A – Results of Operations – Net Interest Revenue, pages 9-11 which provide extensive tabular and narrative discussion of the need to utilize higher cost supplemental funding as a significant driver of increased interest expense and its impact on net interest revenue and net interest margin.

•MD&A – Risk Management – Liquidity Risk on pages 20-24, in particular the tabular presentation of amounts, maturities, and weighted-average interest rates on outstanding borrowings on page 21, the amounts, maturities, and weighted-average interest rates on brokered certificates of deposit on page 22, and the narrative discussion of cash flow activity on page 22.

◦We note further narrative discussion on page 21 regarding certain regulatory requirement considerations for borrowing from the FHLB, and additional discussion in MD&A – Capital Management on page 25 regarding our capital position.

•Note 7. Bank Deposits and Note 8. Borrowings on pages 46-48 which provide additional disclosure of brokered certificates of deposit and borrowings.

We will continue to evaluate the impacts of the Company’s mix of funding sources, and will continue to evaluate in future filings the potential need for additional or modified disclosures based on the facts and circumstances present at such time.

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We note that in your Form 10-K, you provide a brief risk factor that discusses the potential impact on your business from a substantial decrease in liquidity. However, in the first two reported quarters of 2023, you appear to have seen a significant outflow of deposits, an outflow that appears to have been particularly pronounced during the period immediately following the collapse of Silicon Valley Bank.

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However, you did not update the risk factor to discuss your actual experiences with changes to your deposit mix, the availability of liquidity or the costs and availability of replacement funding sources, nor did you discuss the significant events that impacted the availability of liquidity. Please revise your risk factors disclosure. Please ensure that your risk factors discussion is updated to reflect significant changes to the risks.

The last paragraph of our 2022 Form 10-K risk factor titled “A significant decrease in our liquidity could negatively affect our business as well as reduce client confidence in us.” was added in our 2022 Form 10-K to address impacts of recently experienced client cash movements from our sweep products into higher yielding alternatives as a result of the rapid increase in short-term interest rates and our resulting need to use higher cost supplemental funding and the conditions of availability of such funding.

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This paragraph states:

“When short-term interest rates rapidly increase, as they did in 2022, the pace at which clients move certain cash balances out of our sweep features and into higher yielding alternatives generally increases. When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as they recently have, our banking subsidiaries may use temporary supplemental funding, such as advances under Federal Home Loan Bank (FHLB) secured credit facilities, borrowings under repurchase agreements with external financial institutions, and issuances of brokered certificates of deposit, which have higher costs. In addition, to access new FHLB advances or roll over existing advances, our banking subsidiaries must maintain positive tangible capital, as defined by the Federal Housing Finance Agency. Larger unrealized losses on our available for sale (AFS) portfolio due to higher market interest rates could negatively impact our tangible capital.”

Notwithstanding public attention to the collapse of Silicon Valley Bank in March 2023, this event did not have a material impact on the Company’s bank deposits during the first six months of 2023. As we disclosed in our 2023 Form 10-Qs, Schwab’s clients’ bank deposits and brokerage cash accounts primarily originate from our more than 34 million active brokerage accounts, and more than 80% of our bank deposits as of each of the first two quarters qualified for FDIC insurance. While bank deposits decreased $62.3 billion, or 17%, during the first six months of 2023, our clients’ balance of Schwab’s money market funds increased by $114.0 billion, or 41%, and client balances of fixed income securities increased by $129.2 billion, or 22%. We also note that during the first six months of 2023, net new client assets totaled $222.7 billion ($72.9 billion in March alone), active brokerage accounts increased 624,000, or 2%, and banking accounts increased 65,000, or 4%.

The changes in the mix of our funding sources discussed in the risk factor in our 2022 Form 10-K continued into 2023, and the key driver of these changes continued to be the increase in short-term interest rates. As such, when we reviewed the risk factor in connection with our 2023 Form 10-Qs, we determined that there had not been a material change to the risk factor and that an update was not needed.

We also note that we included detailed information in the MD&A section of our Q1 2023 Form 10-Q on clients continuing to allocate assets to higher yielding cash and fixed income alternatives (pages 4-5), our use of higher cost supplemental funding and the impact on net interest revenue (pages 7-9), and liquidity details including availability of funding sources (pages 17-19). We also added line items to our cash flow statement on Proceeds from /Repayments of FHLB borrowings and other short-term borrowings (page 29). Our Q2 2023 Form 10-Q (pages 5-6, 10-11 and 22) included additional detail on our experience over the first six months of 2023 with changes in deposit balances (i.e., clients allocating assets to higher yielding cash and fixed income alternatives) and the additional use and costs of replacement funding sources (i.e., FHLB borrowings and issuances of brokered certificates of deposit), as well as the issuance of long-term debt to provide incremental liquidity. These disclosures also addressed the decrease in FHLB and other short-term borrowings over the second quarter, management’s expectation for the level of supplemental funding balances through 2024 and early 2025, and the risk that additional higher cost supplemental funding may be necessary if client cash allocation movements increased. The discussion about Liquidity Risk in MD&A – Risk Management (page 23) included additional disclosure regarding the Company’s liquidity stress projections and the stability of its funding sources.

We will continue to evaluate in future filings the adequacy of our liquidity risk factor and the potential need to update it based on the facts and circumstances present at such time.

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We note your response to comment 1, in which you note that you believe that qualitative information about your use of EVE, combined with your presentation of sensitivity analysis for your exposure to interest revenue simulations, provides investors with the best understanding of your exposure to market risks.

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We also note your qualitative discussion of the key areas that management monitors to remain within your risk appetite. In the subsequent quarters, your EVE discussion in the relevant 10-Qs do not discuss whether your assumptions, guidelines or other actions were changed as interest rates or other factors changed. Please confirm that you will expand your qualitative discussion in future filings, to address any qualitative changes made to your models, assumptions, targets or management actions as a result of material changes to the key inputs during the periods presented. Please provide us with your proposed disclosures.

Changes in Schwab’s interest rate sensitivity measures, including economic value of equity (“EVE”) and net interest revenue sensitivity, may be driven by several categorical factors, including changes in market rates, changes in balance sheet composition, and changes in modeling and assumptions disclosed in our 2022 Form 10-K and Quarterly Reports on Form 10-Q (“Form 10-Q”) for the quarters ended March 31, June 30, and September 30, 2023 (the “2023 Form 10-Qs”).

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Changes in EVE sensitivity period-over-period are typically driven primarily by market-related changes in valuations across both assets and liabilities as well as changes in the composition of the balance sheet. As we disclosed in our 2022 Form 10-K and 2023 Form 10-Qs, EVE relies on interest rate models and specific cash flow models that are subject to modification. However, the Company did not implement model or assumption changes for the referenced periods that materially impacted Schwab’s EVE sensitivity metrics. Rather, changes in EVE sensitivity for 2022 and 2023 were driven primarily by impacts from rising market rates and changes in the composition of the balance sheet, including the greater use of higher-cost supplemental funding sources discussed in our 2022 Form 10-K and 2023 Form 10-Qs.

In Schwab’s 2023 Form 10-Qs, the Company provided expanded disclosure related to its management of interest rate risk in light of the rising rate macroeconomic environment. In Schwab’s Form 10-Q for the quarter ended September 30, 2023 (“Q3 2023 Form 10-Q”), the Company provided additional disclosure regarding its EVE sensitivity, including clarification of the Company’s use of proprietary and independent third-party models, as well as qualitative discussion of EVE sensitivity trending. In part, this additional disclosure states:

“We use both proprietary and independent third-party models to simulate EVE sensitivity and related analyses. We develop and maintain client credits and deposits run-off models internally based on historical experience and prevailing client cash realignment behaviors. We rely on third-party models for term structure modeling, prepayment speed modeling for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, contractual maturities, and prepayments.

As interest rates rose through the first nine months of 2023, EVE sensitivity generally trended higher due to a shortening of liability duration. While the Company’s asset duration remained largely stable during the period of rising interest rates, liability duration shortened significantly and is now shorter than asset duration.”

In future filings, we will provide disclosure regarding the Company’s EVE sensitivity, similar to the disclosures presented in the Company’s Q3 2023 Form 10-Q, and, if applicable based on the facts and circumstances present at the time of future filings, Schwab will disclose changes in its models or assumptions related to its EVE simulations that materially impact the Company’s EVE sensitivity.

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Similarly, in response to comment 2, you indicate the variables that contain assumptions, without providing disclosure about the assumptions themselves (e.g. prepayment speeds, term structure models, non-maturity deposit behavior, etc.).

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The subsequent quarterly reports note the same general areas where assumptions support your risk management evaluations, without significantly addressing changes to those assumptions, including in response to the substantial increase in rates. To the extent that the key assumptions used to support your quantitative evaluation of interest rate risk simulations change as a result of significant changes to market rates, address those changes in your market risk disclosure for the relevant periods. For instance, we note that during the period you expanded your presentation of the impact of interest rate changes from a single 100 basis point increase/decrease, to instead present 50, 100 and 200 basis points increase/decrease. However, your presentation continues to assume a "gradual increase or decrease" while referencing other simulations, including instantaneous and/or non-parallel shifts. Given the significant changes in interest rates that have occurred during the current year, provide your analysis as to why you have chosen not to only present the sensitivity analysis based on the gradual rate increase scenario.

The Company’s disclosure of the results of gradual parallel increase/decrease scenarios for interest rates in our net interest revenue simulation mirrors our primary approach for managing interest rate risk, including in defining policies and setting risk limits. Though the Company also analyzes a variety of other scenarios (e.g., gradual non-parallel and instantaneous shifts in interest rates), the Company’s established policies related to interest rate sensitivity primarily utilize gradual parallel increase/decrease scenarios.

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Though we have seen very rapid and large interest rate increases recently, which have had significant impacts to Schwab, these increases have typically been concentrated on short-term parts of the yield curve. The gradual parallel rate shock scenario has been considered by the Company over time more representative of actual scenarios than an instantaneous shock. In 2023, the Federal Funds overnight rate was increased 100 basis points through four 25 basis point increases between February and July.

As referenced in the Staff’s comment, the Company provided additional net interest revenue simulation scenarios in its disclosure beginning in the Company’s Form 10-Q for the quarter ended March 31, 2023, and continuing in the remaining 2023 Form 10-Qs, to provide additional information on multiple rate increase/decrease scenarios to investors. We believe this expanded information can be useful to investors, though inclusion of these additional scenarios in our disclosures was not the result of a change in underlying assumptions or policies.

The Company has continued to provide disclosures that discuss the changes in net interest revenue sensitivity in its 2022 Form 10-K (page 51) and 2023 Form 10-Qs (e.g., page 19 of the Q3 2023 Form 10-Q), which have been primarily driven by impacts from rising market rates and changes in the composition of the balance sheet. Though our net interest revenue simulations rely on interest rate models and cash flow models that are subject to modification, the Company did not implement model or assumption changes for the referenced periods that materially impacted Schwab’s net interest revenue sensitivity metrics.

In future filings, as applicable, Schwab will disclose changes in its models or assumptions related to its net interest revenue simulations that materially impact the Company’s net interest revenue sensitivity. In addition, in future filings, the Company will continue to evaluate the nature and magnitude of net interest revenue simulation scenarios that are most useful to investors, and we will continue to consider the net interest revenue simulation scenarios that are of primary focus by the Company in its management of interest rate risk. In future filings, the Company will also clarify in its disclosures that management primarily utilizes gradual parallel scenarios. Should additional types of net interest revenue simulations become material components of the Company’s management of interest rate risk, the Company will consider expanding disclosure at such time to include any additional scenarios.

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Disclose any material litigation risks related to climate change and the potential impact to the company.

In developing the disclosure of risk factors in its 2020 Form 10-K contained in Part I – Item 1A. Risk Factors, the Company evaluated a broad range of risks that could impact the Company with consideration given to its specific business operations, industry, client base, competitive landscape, the macroeconomic environment, and many other factors primarily pursuant to Item 105 of Regulation S-K.

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Through this evaluation process, management included in its 2020 Form 10-K descriptions of the risk factors that the Company believes to be material to its operations.

The Company respectfully references that Item 105 of Regulation S-K states that “[t]he presentation of risks that could apply generically to any registrant or any offering is discouraged...” Similarly, in the SEC’s 2010 Climate Change Guidance, section IV.A. states that “[r]egistrants should consider specific risks they face as a result of climate change legislation or regulation and avoid generic risk factor disclosure that could apply to any company.”

In the Company’s 2020 Form 10-K Part I – Item 1A. Risk Factors, under the heading “Compliance Risks,” the Company disclosed information regarding litigation and regulatory risks that it believes could be material, while seeking to avoid disclosing risks that could apply generically to any registrant. As of the February 24, 2021 issuance date of the 2020 Form 10-K, as of December 31, 2020 and 2019, and throughout the three years in the period ended December 31, 2020, the Company was not, and currently is not, responding to material litigation related to climate change, and in view of the Company’s product line-up at present, does not believe the Company reasonably is exposed to material litigation risks related to climate change. Moreover, while the Company’s wide product offering includes certain investment products with a climate focus, such as certain exchange-traded funds and mutual funds, the Company’s litigation risk associated with such products does not appear unique or particularly acute in comparison to litigation or other product disclosure risks that are described in our filings.

The Company will continue to evaluate the materiality of risk factors we believe impact or are reasonably likely to impact our business, including the risk of litigation related to climate change, and will disclose such risk factors if material, pursuant to Item 105 of Regulation S-K, the SEC’s 2010 Climate Change Guidance, and other relevant regulations and guidance.

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There have been significant developments in federal and state legislation and regulation and international accords regarding climate change. We note that you have not discussed the impact of pending or existing climate change-related legislation, regulations, and international accords in your SEC filing.

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Please revise your disclosure to identify material existing climate change-related legislation, regulations, and international accords and any material effect on your business, financial condition, and results of operations.

The Company’s disclosures in Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are designed to provide information that the Company’s management believes is material to users of the financial statements, consistent with paragraph (a) of Item 303 of Regulation S-K, as amended by the 2020 SEC Final Rule.

In addition to reviewing companyand industry-specific information, Schwab evaluated many sources of information in developing MD&A disclosures for the 2020 Form 10-K, including existing and proposed legislation and regulations that

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could materially impact the Company. As of the date of filing of our 2020 Form 10-K and for the three years ended December 31, 2020, the Company had not identified climate change-related legislation, regulations, or international accords that management believed would have a material impact on our financial condition, results of operations, or amounts and certainty of cash flows from operations or outside sources.

The SEC’s 2010 Climate Change Guidance, section IV.A. describes the approach a registrant should follow when evaluating whether disclosure of a known uncertainty, such as pending legislation or regulation regarding climate change, is required in MD&A. As of the date of filing of our 2020 Form 10-K, the Company had not identified pending legislation, regulations, or international accords that the Company believed would be reasonably likely to have a material effect on the Company’s financial condition, results of operations, or cash flows.

The Company will continue to evaluate potential pending legislation and regulation, including that related to climate change, and, to the extent the Company has assessed such potential pending legislation and regulation to be reasonably likely to have a material effect on the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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Your proxy statement and the environmental stewardship portion of your website describes several climate-related projects you have or plan to undertake. If material, please quantify any past or planned future capital expenditures for climate-related projects.

The Company respectfully acknowledges the Staff’s comment regarding capital expenditures for climate-related projects. As referenced in Part I – Item 2. Properties of our 2020 Form 10-K, the Company incorporates sustainable practices and procedures to guide our facilities’ design, materials, and building technologies.

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The Company’s capital expenditures during the three years ended December 31, 2020 and estimated planned capital expenditures for our 2021 fiscal year disclosed in our 2020 10-K MD&A – Results of Operations – Total Expenses Excluding Interest incorporate certain climate-related considerations, including the installation of a solar field at the Company’s North Texas data center described in further detail on our aboutschwab.com website and in our 2021 proxy statement.

With regard to disclosure in the 2020 Form 10-K, though climate-related considerations are a part of the Company’s capital expenditure projects, capital expenditures specifically related to climate-related projects, including the solar field project in North Texas, were not material to the Company’s financial condition, results of operations, or cash flows as of and for the three years ended December 31, 2020 or to our estimated planned capital expenditures for our 2021 fiscal year. In addition, as of the date of issuance of the 2020 Form 10-K, the Company had not identified material trends or uncertainties in planned future capital expenditures for climate-related projects. The Company will continue to evaluate capital expenditures for climate-related projects, and to the extent material, relevant disclosure will be provided in future periods.

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To the extent material, discuss the indirect consequences of climate-related regulation or business trends, such as the following: • decreased demand for products or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; • increased demand for products that result in lower emissions than competing products; • increased competition to develop innovative new products

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that result in lower emissions; and • any anticipated climate-related reputational risks resulting from your operations or those of your customers or from products you sell (including whether “green” or “sustainable” products are properly marketed as such).

Though the Company views climate-related issues as important and has attempted to incorporate climate considerations in various parts of its business, climate-related regulation or trends have not been material to the Company’s financial condition, results of operations, or cash flows. The Company believes that its activities related to environmental stewardship, though not material to its 2020 Form 10-K, are of interest to some investors and clients, and the Company uses its website and other forums to provide such information.

As a financial services company engaged in a broad range of

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wealth management, securities brokerage, banking, asset management, custody, and financial advisory services, during the three years ended December 31, 2020, the Company had not identified indications that overall demand for the Company’s services had been materially impacted by indirect consequences of climate-related regulation or business trends. In addition, as of the date of issuance of the 2020 Form 10-K, the Company had not identified material trends or uncertainties related to expected demand for our services due to climate-related regulation or related business trends, and, resultantly, the Company did not make such disclosure in the 2020 Form 10-K. The Company will continue to evaluate the potential for changes in demand for our services due to climate-related regulation or related business trends, and to the extent the Company has assessed such impacts to be reasonably likely to have a material effect on the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

As described in Part I – Item 1. Business in our 2020 Form 10-K, Schwab aims to offer a broad range of products and solutions to meet our clients’ needs. Our “Through Clients’ Eyes” strategy emphasizes placing clients’ perspectives, needs, and desires at the forefront. As part of this strategy, the Company evaluates current and potential new client offerings across a broad spectrum of investor preferences. As part of the Company’s ongoing evaluation of its operations and client offerings, to the extent management assesses that climate-related regulation or business trends are reasonably likely to have a material impact on the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in in future periods.

As referenced in our 2020 10-K in MD&A – Risk Management, the Company has a comprehensive risk management program to identify and manage risks and their associated potential for financial and reputational impact. In Part I – Item 1A. Risk Factors of our 2020 10-K, under the headings, “Compliance Risks,” “Operational Risk,” and “Credit Risk”, we disclose certain potential sources of reputational harm that the Company believes could be material to its business. For example, our risk factor on investment management operations on page 17 of our 2020 Form 10-K states that “Failure to properly perform operational tasks, or the misrepresentation of our services and products could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, liability to clients, and the termination of investment management or administration agreements and the withdrawal of assets under our management.” During the three years ended December 31, 2020, the Company does not believe it experienced material climate-related reputational harm resulting from our operations or those of our clients or from products that we sell. The Company will continue to evaluate the materiality of sources of reputational risk that we believe impact or are reasonably likely to impact our business, including climate-related reputational risks resulting from our operations, those of our clients, and from our product offerings related to climate change, and, to the extent the Company has assessed such impacts to be material to the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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If material, discuss the significant physical effects of climate change on your operations and results. This disclosure may include the following: • severity of weather, such as floods, hurricanes, sea levels, extreme fires, and water availability and quality; • quantification of material weather-related damages to your property or operations; • potential for indirect weather-related impacts that have affected or

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may affect your major customers or suppliers; and • any weather-related impacts on the cost or availability of insurance.

As described in Part I – Item 2. Properties in our 2020 Form 10-K, the Company maintains a variety of leased and owned properties throughout the United States for our corporate headquarters, data centers, and offices and service centers, as well as many domestic branch offices. For the three years ended December 31, 2020, management did not identify material weather-related impacts to our operations, financial condition, results, or the cost or availability of insurance, and, resultantly, the Company did not make such disclosure.

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The Company will continue to evaluate weather-related impacts to our business, and, to the extent the Company has assessed such impacts to be material to the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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Disclose the material effects of transition risks related to climate change that may affect your business, financial condition, and results of operations, such as policy and regulatory changes that could impose operational and compliance burdens, market trends that may alter business opportunities, credit risks, or technological changes.

The Company respectfully acknowledges the Staff’s comment regarding disclosure of the material effects of risks related to policy and regulatory changes regarding climate change. The Company monitors and evaluates proposed and final legislative and regulatory matters that could impact the Company. As of the February 24, 2021 issuance of the 2020 Form 10-K, and for each period included therein, the Company had not identified any pending policy or regulatory changes regarding climate change that either had a material impact on, or the Company believes would be reasonably likely to have a

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material impact on, the Company’s business, financial condition, results of operations, or cash flows regarding operational and compliance burdens, credit risks, or technological changes. Resultantly, the Company did not make such disclosure in its 2020 Form 10-K. As noted in the Company’s above response to the Staff’s comment 2, the Company will continue to evaluate potential pending legislation and regulation, and, to the extent the Company has assessed such potential pending legislation and regulation to be reasonably likely to have a material effect on the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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Quantify any material increased compliance costs related to climate change. We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.

For each of the three fiscal years in the period ended December 31, 2020, the Company did not incur material compliance costs that management determined to be related to climate change. Moreover, the Company did not identify any material known trend or uncertainty around compliance costs related to climate change as of December 31, 2020 or during the three years then ended, and, resultantly, the Company did not make such disclosure in our 2020 Form 10-K.

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The Company will continue to evaluate potential compliance costs related to climate change, and, to the extent the Company has assessed such potential costs to be material to the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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We reissue in part comment 1. We note your response to this comment. Tell us how you evaluated material litigation risks related to climate change to which you are potentially exposed other than those related to your present product line-up.

The Company is a financial services company that provides retail brokerage and banking services to individual investors; retirement plan services and other corporate brokerage services to businesses and their employees; and custodial, trading, banking, support services and retirement business services to independent registered investment advisors, independent retirement advisors, and recordkeepers.

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The Company also offers a broad range of products, including brokerage, mutual funds, exchange-traded funds, advice solutions, and banking.

In drafting the disclosure of risk factors in its 2020 Form 10-K, the Company reviewed its existing risk factors to determine whether (i) new risk factors needed to be added to address current or potential risks that could be material to its business, financial condition or results of operations, (ii) existing risk factors were no longer material risks and should be removed, and (iii) information regarding material continuing risks needed to be updated. This review was done by a cross-section of Company personnel who address risk within the Company and approach risk from different perspectives. This assessment involved the consideration of many factors impacting the Company’s business, including its products and services, its client base, third-party service providers, as well as the relevant regulatory environment.

Pursuant to Item 105 of Regulation S-K and other relevant regulations and guidance, the Company disclosed information regarding litigation and regulatory risks that it believed could be material and avoided disclosing risks that could apply generically to any registrant. Litigation risks related to climate change were not a material risk identified by the Company. The Company is not currently subject to any pending or threatened litigation related to climate change, and, due to the nature of its business activities, has not identified climate change-related litigation as a material risk to its business, financial condition or results of operations. Additionally, while the Company’s product offerings include certain investment products that consider environmental, social and corporate governance factors (ESG Products), the Company’s litigation risk associated with such products does not appear unique or particularly acute in comparison to litigation or other product risks that are described in the Company’s filings.

The Company will continue to evaluate the materiality of risk factors it believes impact or are reasonably likely to impact the Company’s business, including the risk of litigation related to climate change, including from any future product offerings, and will disclose such risk factors if material, pursuant to Item 105 of Regulation S-K, the SEC’s 2010 Climate Change Guidance, and other relevant regulations and guidance.

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We reissue in part comment 2. Please explain how you considered providing disclosure addressing the difficulties involved in assessing the timing and effect of pending climaterelated laws, regulations or guidance.

As a participant in the securities, banking and financial services industries, the Company is subject to extensive regulation under both federal and state laws by governmental agencies, supervisory authorities, and self-regulatory organizations, and on an ongoing basis, monitors and evaluates pending and final legislation and regulations to assess the potential impact on the Company’s business and operations.

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When legislation or regulatory developments could have a material impact on the Company, information about such developments is included in the Company’s Form 10-K and Form 10-Qs to describe the anticipated impact to the Company. Before the Company can provide meaningful discussion of a rule’s or regulation’s potential known or estimated impact, or the difficulty in assessing the potential timing and effect, a proposed or final version of the rule or regulation must be available. The Company did not include discussion about climate-related laws, regulations and guidance, including the potential difficulty in assessing material impacts of such, in the Company’s 2020 Form 10-K since the Company had not identified any pending or final climate-related laws, regulations, or guidance that management believed would be reasonably likely to have a material impact on the Company’s business, financial condition, results of operations, or cash flows.

The Company will continue to monitor and evaluate pending legislation and regulation, including developments related to climate change, and, to the extent the Company assesses such pending legislation and regulation to be reasonably likely to have a material effect on the Company’s business, financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods. As part of its ongoing monitoring and evaluation, the Company will also consider disclosure, if material, of the difficulties involved in assessing the timing and effect of pending legislation or regulation.

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We note from your response to prior comment 3 that capital expenditures specifically related to climate-related projects were not material to your financial condition, results of operations, or cash flows as of and for the three years ended December 31, 2020 or to your estimated planned capital expenditures for your 2021 fiscal year. Please provide us with quantitative information supporting this statement.

In the MD&A section of the 2020 Form 10-K, the Company disclosed that capital expenditures for the fiscal years ended December 31, 2020, 2019, and 2018, were $741 million, $753 million, and $576 million, respectively. These amounts represented 0.1%, 0.2%, and 0.2% of total balance sheet assets as of December 31, 2020, 2019, and 2018, respectively.

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The Company also disclosed in its 2020 Form 10-K that it anticipated capital expenditures would be 6-7% of total net revenues in 2021, and through September 30, 2021, total capital expenditures were $610 million, or 0.1% of total balance sheet assets as of September 30, 2021. Investments in buildings and software made up 78%, 78%, and 84% of our total capital expenditures for the years ended December 31, 2020, 2019, and 2018, respectively, however, these investments were not driven specifically by climate-related projects. The Company’s capital expenditures specific to climate-related projects are a de minimis portion of the total capital expenditures. The Company will continue to evaluate capital expenditures for climate-related projects, and to the extent material, relevant disclosure will be provided in future periods.

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Your response to comment 4 states that indirect consequences of climate-related regulation have not been material to your financial condition, results of operations, or cash flows. Your response appears to be conclusory and does not adequately address the specific items from our prior comment.

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Tell us about the indirect consequences of climate-related regulation or business trends considered in your response, your process for identifying such matters, and how you assessed potential materiality. For example, provide us with additional information supporting your statement that you do not believe that you experienced material climate-related reputational harm resulting from your operations or those of your clients or from products that you sell.

Schwab is a financial services company that provides retail brokerage and banking services to individual investors; retirement plan services and other corporate brokerage services to businesses and their employees; and custodial, trading, banking, support services and retirement business services to independent registered investment advisors, independent retirement advisors, and recordkeepers. The Company also offers a broad range of products, including brokerage, mutual funds, exchange-traded funds, advice solutions, and banking.

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The Company does not believe that its products and services produce greenhouse gas emissions or are related to carbon-based energy sources. The Company is not aware of any direct or indirect consequences of climate-related regulation or business trends that have impacted demand for the Company’s products or services, other than increased demand for the Company’s ESG Products, including mutual funds and exchange-traded funds.

The Company is not aware of suffering any climate-related reputational harm from its operations, its clients, or from the financial products and services that it provides. However, if the ESG Products that the Company offers were to be misrepresented, the Company could suffer reputational harm. The Company covers that potential risk in the risk factor on investment management operations on page 17 of the Company’s 2020 Form 10-K, where the Company states that “Failure to properly perform operational tasks, or the misrepresentation of our services and products could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, liability to clients, and the termination of investment management or administration agreements and the withdrawal of assets under our management.”

As part of the Company’s ongoing evaluation of its operations and client offerings, to the extent management assesses that climate-related regulation or business trends are reasonably likely to have a material impact on demand for the Company’s services or products or cause reputational harm, relevant disclosure will be provided in future periods.

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We reissue in part comment 5 as your response does not appear to address each of the items from our prior comment. Please tell us in more detail how you considered providing a discussion of the significant physical effects of climate change on your operations and results, such as effects on the severity of weather.

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As part of your response, address the potential indirect weather-related impacts that have affected or may affect your third-party vendors or third-party service providers. In addition, quantify weather-related damages to your property or operations and explain how you concluded that there was no material weather-related impact to the cost or availability of insurance.

For the period covered by the 2020 Form 10-K and during 2021, the Company did not suffer any material direct or indirect physical effects of climate change on its operations and results, including no material direct or indirect weather-related damages to the Company’s property or operations and no material loss of service from third-party vendors related to severe weather events.

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For example, while the Company had weather-related damage to its landscaping and some water damage from broken pipes due to the 2021 ice storm in Texas, the cost of the damage was not significant and the Company did not make any insurance claims for the damage. The Company’s insurance premiums increased across the board in 2021 due to changes in the insurance market and the Company’s property policies were adjusted to include a new, special deductible for claims from “convective storms,” however, such increases and changes were immaterial.

The Company’s discussion of Operational Risk on pages 47 and 48 of the 2020 Form 10-K, states that the Company’s operations are highly dependent on the integrity and resilience of its critical business functions and technology systems. To the extent the Company experiences business or system interruptions, errors or downtime (which could result from a variety of causes, including natural disasters), the Company’s business and operations could be negatively impacted. To minimize business interruptions and ensure the capacity to continue operations during an incident regardless of duration, the Company maintains a backup and recovery infrastructure which includes facilities for backup and communications, a geographically dispersed workforce, and routine testing of business continuity and disaster recovery plans and a well-established incident management program. The discussion of Operational Risk further states that the Company also faces operational risk when the Company employs the services of various third parties, including domestic and international outsourcing of certain technology, processing, servicing, and support functions. The Company manages the exposure to third party risk and promotes a culture of resiliency through contractual provisions, control standards, ongoing monitoring of third party performance, and appropriate testing. In addition, the Company’s risk factor section in the 2020 Form 10-K includes references to natural disasters on page 17 “Technology and operational failures or errors could subject us to losses, litigation, regulatory actions, and reputational damage” and on page 18 “We rely on outsourced service providers to perform key functions.”

The Company makes first lien residential real estate mortgage loans (mortgage loans) and home equity lines of credit (HELOCs) to banking clients and also invests in mortgage-backed securities. To the extent that loans are secured by properties in the same geographic region, the Company could experience increased credit loss expense in the event of an extreme weather event in that region. The risk factor titled “We may suffer significant losses from our credit exposures.” on page 19 of the 2020 Form 10-K, discusses how mortgage loans and HELOCs to banking clients which are secured by properties in the same geographic region can increase the Company’s risk of loss. The Company also notes on page 91 of the 2020 Form 10-K that “At December 31, 2020 and 2019, 45% of the First Mortgage and HELOC portfolios were concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.” In estimating the allowance for credit losses (ACL) for the Company’s bank loans portfolio, the Company evaluated the impacts of weather-related events in recent years, including wildfires and hurricanes. The Company determined that these events did not have a material impact on the ACL. The Company’s charge-offs and total ACL on bank loans were immaterial for all periods presented in the 2020 Form 10-K. The ACL on bank loans of $30 million and $18 million as of December 31, 2020 and 2019, respectively, represented approximately 0.1% of total bank loans for both periods. Charge-offs were $1 million or less for each of the years ended December 31, 2020, 2019, and 2018.

The Company will continue to evaluate weather-related impacts to its business, and, to the extent the Company assesses such impacts to be material to the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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Your response to comment 6 indicates that you have not identified material transition risks related to climate change. Please tell us how you assess potential transition risks and why you concluded that disclosure was not required.

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Your response should specifically address the different types of transition risks related to climate change you considered, including those noted in our prior comment, and explain your basis for concluding that they will not have a material impact on your business, financial condition, results of operations, or cash flows.

As a participant in the securities, banking and financial services industries, the Company typically experiences transition risks when there are significant changes in the laws or regulations that the Company’s business and operations are subject to. The Company also experiences transition risks when it undertakes integration work related to material acquisitions such as its recent acquisition of TD Ameritrade Holding Corporation.

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In such situations, the Company assesses potential transition risks by evaluating the work that will be required to go from the current state to the future state, and the time, effort and expense required to complete that work. The Company also evaluates the related risks to determine the type and level of the risks as well as the consequences of the transition which may include changes to the services and products that the Company offers and an increased compliance burden. With regard to climate change, the Company has not identified any material transition risks but will continue to evaluate pending legislation and regulation, and, to the extent the Company assesses any developments to be reasonably likely to create material transition risks for the Company, relevant disclosure regarding those risks and their material effects will be provided in future periods.

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Your response to comment 7 states that you have not incurred material compliance costs related to climate change. Describe the nature of the compliance costs you have incurred and provide us with quantitative information supporting your statement that the related amounts were not material.

Given the nature of the Company’s highly regulated business and its existing risk framework and infrastructure, the Company’s compliance costs related to climate change have been de minimis. Developments related to climate change have been handled using the Company’s existing infrastructure for monitoring and evaluating legislative and regulatory developments, developing new products and services, and providing relevant disclosures.

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The Company will evaluate compliance costs incurred related to climate change, and, to the extent the Company determines such costs to be material to the Company’s financial condition, results of operations, or cash flows, relevant disclosure will be provided in future periods.

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