Andy Clark Gerald L. Hassell - Chairman, Chief Executive officer, President, Member of Executive Committee, President of the Bank of New York and President of the Mellon Bank NA Thomas P. Gibbons - Vice Chairman, Chief Financial Officer and Senior Executive Vice President Curtis Y. Arledge - Chief Executive Officer Brian T. Shea - Head of The Broker Dealer & Advisor Service Group and Chief Executive Officer of Pershing LLC Timothy F. Keaney - Vice Chairman, Chief Global Client Management Officer, Senior Executive Vice President and Chief Executive Officer of Asset Servicing Karen B. Peetz - Vice Chairman, Chief Executive Officer of Financial Markets & Treasury Services and Senior Executive Vice President Arthur Certosimo - Senior Executive Vice President and Chief Executive Officer of Alternative and Broker-Dealer Services

Glenn Schorr - Nomura Securities Co. Ltd., Research Division Howard Chen - Crédit Suisse AG, Research Division Betsy Graseck - Morgan Stanley, Research Division Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division Cynthia Mayer - BofA Merrill Lynch, Research Division Alexander Blostein - Goldman Sachs Group Inc., Research Division Brian Bedell - ISI Group Inc., Research Division Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division Kenneth M. Usdin - Jefferies & Company, Inc., Research Division Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division

Good morning, ladies and gentlemen, and welcome to the second quarter 2012 earnings conference call hosted by BNY Mellon. [Operator Instructions] Please note that this conference call webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent. I will now turn the call over to Mr. Andy Clark. Mr. Clark, you may begin.

Thanks, Wendy, and welcome, everyone. With us today are Gerald Hassell, our CEO; Todd Gibbons, our CFO, as well as several members of our executive management team. Before we begin, let me remind you that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by the forward-looking statements as a result of various factors. These factors include those identified in the cautionary statement on Page 14 of the press release and those identified in our documents filed with the SEC that are available on our website, bnymellon.com. Forward-looking statements in this call speak only as of today, July 18, 2012, and we will not update forward-looking statements. Our press release and earnings review are available on our website, and we will be using the earnings review to discuss our results. Now, I'd like to turn the call over to Gerald. Gerald?

Thanks, Andy, and good morning, everyone. And thanks for joining us. As you saw from our release, the second quarter, we generated net income of $466 million and earnings per share of $0.39. Now, of course, this includes our previously announced litigation charge of $0.18 per share. After netting out a few items, we look at our core earnings at about $0.53 per share, and Todd will walk you through how we get there. Now that compares to $0.59 in the second quarter of last year and $0.52 per share in the first quarter of this year. We achieved another quarter of positive growth in Investment Management and Investment Services fees, a clear sign of the strength of our business model. The impact of new business helped drive our fee growth. In Investment Management, we had $26 billion in long-term inflows. Now that's the 11th consecutive quarter of positive long-term flows in our Investment Management segment. And we also are pleased to report that during the quarter, the pensions and investment publication published an annual survey that ranked us #1 for providing liability-driven solutions to our Insight boutique. In Asset Servicing, that new business helped drive assets under custody, a record level of more than $27 trillion. Also, like asset management, the quality of our Asset Servicing capabilities continues to be recognized by third parties and is clearly helping us win business. During the quarter, we received 17 #1 category rankings among our peer group of the world's largest global custodians in the Global Investor survey publication. That follows top rankings last quarter among peers in the 2 other major surveys. So we grew fees during the quarter in both major business segments when key equity indices were actually down, and there was lower volatility in the currency markets. Turning…

Thanks, Gerald and good morning, everyone. My comments will follow the quarterly earnings review beginning on Page 2. Reported earnings per share, $0.39. This includes the $0.18 for the litigation charge that we announced last week. It also includes a total benefit of approximately $0.04 related to securities gains. We had a slightly lower tax rate, and we also had a negative loan loss provision for the quarter. The way we look at our core earnings, therefore, it nets to about $0.53 for the quarter. On a sequential basis, total revenue is $3.6 billion. That's down 1%, while fee and other revenue was unchanged. Investment Services fees, Investment Management and performance fees and FX were all up. They were offset by declines in NIR and investment and other income. If you exclude the volatile category of investment and other income, our core fees were up 3% for the quarter. And we're continuing to hold the line on core expenses. Now, let's turn to Page 4, where we'll call out some of the business metrics that help explain our underlying performance. On Page 4, you can see that our assets under management of $1.3 trillion was down slightly sequentially. And that reflects the lower equity market values that we saw on the second quarter. Those lower market values were offset partially by inflows, and they're up 2% year-over-year as asset inflows were offset also by lower equity market values. We had long-term inflows for the quarter of $26 billion, and it benefited from the strength on our fixed income and equity index product. It was our 11th consecutive quarter of positive long-term inflows. Assets under custody and administration was up 2% sequentially to a new record of $27.1 trillion, driven by net new business, but also offset by slightly lower equity…

Great. Thanks, Todd. And I think we're ready to open it up for questions.

[Operator Instructions] Our first question today is from Glenn Schorr with Nomura.

I'm curious if you could expand a little bit on the big increase in deposits, where it came from, what kind of clients were they, where you're putting the assets right now?

Yes. Most of the deposit in increase, Glenn, was a spike right in the end of the quarter. So it's going to be relatively temporary. If you look at, for the quarter on average, it was only up about $3 billion.

Got it. But -- so you mentioned it spiked at the end of the quarter, but temporary just client parking money, not putting money to work. So I'm assuming you're keeping -- parking that at the Fed?

That's right. That's going to be in and out over maybe a 4-week period.

Got it, got it. On the NIM side, if you look at through the detail in the average balance sheet, it's kind of simple that asset yields coming down at the deposits, primarily foreign deposits. And it seems like you have less room on the liability side. Is that basically where we're at now? And you mentioned you think you can defend these levels even with the ECB cut, but is there any chance to move the deposits over maybe with the Fed and pick up a little bit?

It would be a wonderful thing if you could actually, Glenn, swap the deposits, swap euros into dollars and leave them at the Fed, but the swap would go against you negatively It actually would create a negative interest rate. So at this time, not much of a change there.

Okay. And so with no change, is this the type of quarterly progression we're looking at, or was that like a onetime step-down, and now we can hold these levels even if rates don't move?

I think we can hold these levels. We do have some headwinds here, because we do tend to leave some money at the European Central Banks. And that was -- in the past, we received a little bit of an interest rate. We won't see that going forward for the foreseeable future, but we are continuing to put more money to work, primarily in dollars, where we are continuing to find some pretty attractive low-risk assets. And I think that will offset the 2 headwinds, if you will.

Glenn, I also want to emphasize as we're doing this, Todd made some comment in his opening commentary that we've been a little bit slower in putting some of the money to work, because frankly, we've been quite conservative in putting the money to work because we to want to stay within our risk appetite. We're not looking to go out of the bounds of our risk parameters, and we just don't think it's prudent to do so in this kind of environment.

Last one is just maybe a little more color on the huge flows that you keep seeing. What products are these? What's the average fee relative to the current book of business? Anything you could help there would be great.

Glenn, you're referring to asset management?

Correct.

Let me turn that one over to Curtis.

Glenn, in the first quarter, we actually -- even assuming that [ph] long-term flows of $7 billion. And in this past quarter, it was $26 billion. I actually thought the composition was pretty different. As you know, the markets were a little bit better in the first quarter. Equity markets were up, and we saw higher average fee products in the first quarter. In the second quarter, it did revert back to more fixed-income, more index products. So we frequently talk about our business in terms of assets under management. From a revenue perspective, though, they're actually pretty similar quarters. The $26 billion would have been in lower average fee products. And we do see in our pipeline, I will tell you that our pipelines generally are more favorable. The mix is toward higher fee products. So actually, our one not-funded mandates have a slightly higher average fee going forward at the end of the second quarter than they did at the end of the first quarter.

Our next question is from Howard Chen with Credit Suisse. Howard Chen - Crédit Suisse AG, Research Division: Todd, just putting frictional deposits aside, can you just provide an update on some of the taxable actions to stabilize and expand the NIM that you laid out the Investor Day? And do your thoughts change at all now that we're seeing some further compression across the yield curve and the long end?

Sure. Not a whole lot. I mean, what we indicated to you is that we would invest in some RMBS securities, primarily agencies, but there are some non-agencies to note as well. Some asset-backed securities, which we continue. We're probably doing a little more treasuries than we would have thought, just given the rate environment and the risk environment. So I'd say it was a combination of the 3 of those. Outside of the securities portfolio, we have begun a program of secured lending globally. That is slower than we had anticipated, but it is slowly building, and we're continuing to add to that. We also see some opportunities, for example, in trade finance as you had a number of folks exit. That has grown. We got a big pop a while back. It's growing a little more modestly, but that's another area that we'd be looking to push. Howard Chen - Crédit Suisse AG, Research Division: Great, thanks. And then shifting gears to the revised Basel III guidance, there seems to be a lot of questions in the market. And I think it'd be helpful if you could just walk through some of the moving parts of the new guidance, maybe walk through what your risk rating assumptions were before and what they are now in some of the various parts of the portfolio that are being impacted?

Okay. I mean, we're kind of unusual, as you know, Howard, because we had maintained a large portfolio of sub-investment-grade securitizations. And that was the portfolio even though we had marked it to market, and we felt it was actually a pretty attractive and not nearly as risky asset, especially where we were carrying it. It actually required more than 100% capital against it. So under the revised guidance and what is known as the simplified supervisory formula approach, which I can tell you is anything but simplified, but under that guidance, the capital associated with those sub-investment-grade securities declined pretty significantly. Still very high, but to a much more reasonable level. So as we had indicated in the past, that was probably costing us 250, maybe even 300 basis points against our Tier 1 common ratio. That probably declined to about 200 basis points, so -- excuse me, by 200 basis points. So we picked up a very large benefit there, about 2/3 of the -- about a 2/3 reduction. That was offset by a couple of other items. Number 1 is the investment-grade securitizations moved from a floor of about 7% to a floor of 20%, and, depending on the attachment point, the detachment point and the delinquencies in the underlying securities, they can be higher or even higher than the 20%. So that was a give-back of some of that 200 basis points that I just described. And in addition, there is a correlation multiplier for primarily financial institutions exposure. Since we do have financial institutions exposure, that had a negative impact to us, as did the smaller one, but as did the market risk assessment that came in the quarter as well. So all of those amounted to about 145 basis points of benefit. And then our balance sheet grew in the second quarter by about 35 basis points, hence the requirement, hence the 110 basis points that we reported. Howard Chen - Crédit Suisse AG, Research Division: Thanks for all the detail, that is helpful. And you've always stressed the point that the past few stress tests have been predominantly Basel I focused. But I'm just curious, given this improved guidance post the NPRs, how does this change your capital return philosophy when you think about resubmitting the CCAR for more capital return this year?

Yes. As we're nicely positioned under Basel III. As you can see here, we're well ahead of where even we had anticipated we would be. I think we think it's reasonable, because frankly, we didn't think that the sub-investment grade security should have attracted the amount of capital that they had. So basically, it's in line with what our thinking was. So we're happy to see that there -- that we had greater flexibility, and we're happy to see that others in the past have been able to take capital actions at significant levels. Howard Chen - Crédit Suisse AG, Research Division: And then just final quick numbers one for me, Todd. That merit increase that began in July 1 that you spoke to, is there any way to kind of size the impact of that?

It will probably be about a $0.01 of expense.

Our next question is from Betsy Graseck with Morgan Stanley.

Two questions. One on the performance fees, very strong performance fees in the quarter. Could you just give us some color on that, given that the markets wouldn't have suggested that strong of an outcome?

So our performance fees, we have a wide variety of mandates that generate performance fees. And the bulk of them are recorded and paid in the fourth quarter. So our fourth quarter is generally our highest quarter for performance fees. If you go back over the last 4 years, we've had an average performance fee of about $100 million on average annually, and roughly 60% of that would have occurred in the fourth quarter. So that seasonality we would generally expect. To your point, we had a very strong second quarter. We do have a number of mandates that pay annually, but the beginning date might be February, so February to February or June to June. We also do have mandates that pay more frequently than annually, so we might value performance fees semiannually. So the second quarter has been the second-highest quarter typically. And this particular quarter, the performance fees that we earned are indexed to a variety of benchmarks. So it might be the clients' portfolio benchmark, it could be the S&P 500, an index, or it could be a nominal benchmark like both a yield -- a targeted return of 8%. In this particular quarter, we had actually nice breadth across our investment firms. Three of our investment firms actually have pretty meaningful performance fees because they beat a benchmark. Again, I think a lot of people associate performance fees with just, as the market goes up a lot, you'll have a lot more performance fees. And there is some correlation to that. But a lot of our performance fees are actually geared more to whether we beat a benchmark, so in a down market, if we had been underweight risk or underweight the right factors or if we had been positioned in a way that we can outperform a benchmark, then we have the opportunity to earn performance fees in the second quarter, that turned out to be pretty positive. I do think that it's important to note, we still think the seasonality that has existed in the past is what you should expect going forward. And so if on average, we've earned $100 million annually on performance fees, so far year to date, we've earned about $64 million. So we might have a better year. But the seasonality, we still expect the third quarter to be generally lower and the fourth quarter to be generally higher.

Okay. So 2 takeaways. One is that the performance fees are reflecting the second quarter performance. There's no kind of lagging from what happened in the first quarter?

Yes, there are a lot of things going on in -- so many mandates contribute to the overall performance fee. I would tell you that what drove the strength of it is mandates that outperformed in the second quarter, but they are mandates that have been around for a long period of time. So there -- it could have been a June to June measurement period. In the second quarter, we had the payment of those performance fees.

Got it, okay. And it's more equity or FIC or...

It's -- again, it's mixed. I would say that our fixed income mandates generated a large share of the performance fees this quarter.

Okay, great. And then just secondly, for Todd, on the operational excellence initiatives update that you gave us, it feels like you're a little bit farther along than what your targeted plan is. Are you -- does this suggest that you're going to be either extending the amount of dollars you anticipate you'll be getting back from the program? Does it suggest that you'll just be getting there sooner?

We knew, Betsy, and we try to make this evident in the first quarter, we knew that a lot of the benefit we were going to get for the initial actions that we took was going to be in the first quarter. And we've got that run rate. So you can see, we invested in the second quarter about as much as we benefited. And we would expect that to be the case for most of the rest of this year. I think we can beat it. I think we might be able to beat the target that we've established here. But we are going to making some additional investments, and we want to make sure that that's understood. So not a huge amount of additional benefit in 2012. I think you'll start to see it in 2013, the investments that we're making in the second half of this year.

Just to add, Betsy, though, just as on a business-as-usual basis, given the slower revenue environment that we're all facing. We're being incredibly disciplined around the core expense base as well, and we're really trying to manage those very, very tightly in addition to the initiatives that we have in place. So we're being very, very mindful of all of our expenses across the board.

But the way we designed it, the cost to decommission systems, the cost to consolidate real estate is embedded in the benefit.

Our next question is from Cynthia Mayer with Bank of America Merrill Lynch.

You mentioned that clearing services fees were higher despite lower transaction volumes, and I think you mentioned higher mutual fund fees. So I'm wondering if you could give some color on why those are trending higher? Is that a mix shift or a change in the actual fees somehow charged on the funds?

This is Brian Shea. Just mutual fund assets are growing modestly, driven by asset values, but we continue to have more individual investments in mutual fund positions on the platform. And one of the things we're doing is we're seeing growth in the mutual fund no-transaction-fee platform that we have. And we're also in the process of converting our mutual fund processing to an internal sub-accounting system called Surpass [ph], which is a service delivered by the Asset Servicing group within BNY Mellon. So essentially what we're doing is we're making the mutual fund processing more operationally efficient, and that's part of the driver behind the mutual fund revenue growth.

Yes, and I would also add, Cynthia, that's it's -- and Brian is being a bit modest in the sense that we are getting a lot more accounts on the platform to begin with. Some of the clients that are there today are being more successful in gathering assets, and we're being more successful in gathering clients. And so I think it's just a reflection of the strength of the platform overall and that we're not being heavily reliant on some of the traditional fee categories for us to be able to show improvement in clearing services.

Exactly. I guess we're still seeing underlying growth in the base of individual investments and individual security positions and custody. And that's helping drive strong core fee revenue growth.

Okay, great. And then just on the record AUC levels and the 314 in wins, granted, I'm sure there's a lot of variety there. But can you give any color on sort of the composition of the wins recently? Any shift there? Are the fees any different from your existing book?

Cynthia, it's Tim Keaney. I would say, yes, we continue to see continued growth in outsourcing and transfer agency, part of what Brian just referenced. We see a lot of activity from financial institutions that also drove a big uptick in our sales pipeline, which is up 50% quarter-on-quarter. So I'd say you'd see about 40% to 50% kind of outsourcing and transfer agency, which really isn't geared towards AUC. And the rest are good stock and trade core asset servicing business. And I wouldn't say there's an overall change in pricing. I would say we've seen a tap down on repricing as we've continued to maintain strong pricing disciplines. But new business, I wouldn't say I've seen a material change in pricing.

Our next question is from Alex Blostein with Goldman Sachs.

I wanted to go back to the balance sheet just one second. Can you help us break down the balances that you guys have with central banks, between the Fed, ECB and maybe some other ones, just to kind of better get a sensitivity if there are, in fact, more moves by other central banks.

Yes, Alex, those -- we don't disclose which central bank there -- any balances might be sitting, where they might be sitting. And they're so volatile, I don't think it would be particularly helpful to get a snapshot.

Okay. And then within, I guess, Todd, you mentioned discount accretion was a little bit lower for this quarter. I was hoping you could give us the number, what that was this quarter versus last quarter?

Yes, it's probably down about $6 million or $7 million, Alex, on a quarter. And I would expect that it will slowly amortize down. You can probably look at it about $5 million-a-quarter reduction.

Got it. And then just maybe hoping to spend a couple of minutes on the update on litigation. So obviously, the Sigma settlement that you guys announced a few weeks ago, I guess there's a few other lawsuits outstanding with the similar issues, so I was just wondering how that might change your views around reserves or future litigation expense on that front. And I guess the second one is around foreign tax credits and the impact of the recent settlement, I guess, from a similar lawsuit, if you, I guess about 1.5 months ago and how, again, how that impacts your view on litigation reserves for that loss.

So I didn't -- the first question was related to the...

The Sigma settlement. Why don't I take that one, and then you can talk about the tax matter one. The charge that we took a couple of weeks ago was principally related to the class action suit that was raised, so $280 million, and it's subject to court approval, but principally related to that single-class action suit. There are similar clients, who had similar issues who were not in that class action that we also incorporated into the charge. So we feel like we have the vast majority of the financial crisis Sigma-related litigation charges embedded in that single number.

And as regards the tax matter that you raised, Alex, there was a recent court decision, there was a possibility that could have influenced our thinking around the reserves. But it was the -- the decision was not based on the -- on our case, which was economic substance. So it really did not inform our case at all at this point. We have tried the case, and we're looking forward to, I think, we -- our team did a very nice job. And we're looking forward to a judgment probably sometime in the spring of next year.

Got it. And Todd, just the last one for me. In the Issuer Services this quarter, I think you guys had a bit of a seasonal benefit as well, obviously smaller than you have in the third quarter. Can you give us a sense what the benefit, I guess, was this quarter and how we should think about the seasonal benefit within Issuer Services for the third quarter?

Yes, that was referring, specifically -- in the Issuer Services business, we really had 3 business. We had Shareowner Services, we had Corporate Trust and we had DRs. And we share -- we sold our Shareowner Services at year end, so we try to show you with the -- with and without the performance of -- or the historical performance of Shareowner Services. And as regards to the DR business, I'll turn it over to Karen.

Sure yes. The DR business has a lot of impact from the emerging markets activity, so when that turns down, so does the activity in the market. There's lower issuance in cancellation, less corporate action as well as fewer IPOs. So although we expect in the third quarter to see some increased dividend, the actual overall activity has decreased.

Your next question is from Brian Bedell with ISI Group.

Just quickly on the Basel III securities. So for the sub-investment-grade securities, based on your comments, Todd, if you were to sell them now, would they still generate some additional improvement in Tier 1 common?

They would, Brian, but nowhere near to the degree using the new rules that they would have in the past.

Right. So based on the numbers that you put out, it looks like maybe a little -- like 100 basis points or less instead of the 250 to 300?

Yes, something like that.

Okay and does the change in the Basel III ratios impact your view on doing M&A over the next couple of years?

I'll turn that one over to Gerald.

Yes, Brian, as I said earlier, we're really focused on organic growth and the initiatives that we've identified internally. We, interestingly, have identified a number of things that we think that are better investment than M&A activities. Over a period of time, Global Collateral Services is a great example, pulling together a variety of activities across our company and investing in the technology and the front end to solve a problem in the marketplace. We're also more focused on making sure we execute on a variety of the integration and operational excellence initiatives, and those have some costs associated with them. And we think there's a faster payback on those as well. So we just think that those things are a better investment than looking externally for M&A opportunities. Plus, our share buyback program, given our share price, we think that's a better investment overall as well. That being said, if something extraordinarily comes across the take [ph] at a price that's unbelievable, sure, we'll take a look at it. But I think we have enough opportunities internally to really generate better returns for our shareholders.

And then in the Asset Servicing business, quick question for Tim. On the net new business that was installed in the second quarter and how much is left to install in the pipeline. And then also, Tim, if you can comment on the FX trading. It looks like you gained market share versus State Street and Northern Trust this quarter. Is there anything that you've done to retool that platform, and how do you see that going forward?

Yes, Brian, I'll take the Asset Servicing and new business question. I'll invite Art to talk about the FX. We have about $400 billion to convert. Just about all of it will convert before the end of the year. So I would say that's looking pretty good. I think I mentioned I'm also encouraged by the big uptick in the pipeline, and it's really driven by, really, fund managers that are rationalizing the number of their providers. And we've also seen a shift now 2 quarters in a row as fund managers launching new products, which is something we've been delighted to see. So strong new pipeline and about $400 billion left to convert.

And just quickly on the pricing initiatives on the smaller clientele, can you just give us an update on how that is going?

Yes, thanks, Brian. We finished pricing about 650 tail clients. I'll just remind everyone those are the smallest clients that we have. We've retained just over 75% of those clients. So I'm delighted with that result. We've had about 20 larger clients. So clients that are paying us $0.5 million and above whose contracts have come up for review. And I think I mentioned last quarter that as new clients come up, and that may take a cycle of 3 or 4 years, we're repricing those clients, and we've kept every one of those clients as well because of the approach we've taken. So I still call it early innings, Brian, but as we're working up the lead table and as clients come up for review, those quality statistics that Gerald referenced in his opening comments are really making a difference.

Okay, that's great. And then on the FX?

Hi, Brian, Art Certosimo here. Recently, we implemented a new standing instructions program, which has helped maintain standing instructions volumes. So giving clients choice in the standing instructions space clearly has made a difference. And clients are doing their part to either maintain or increase negotiated volume. So we're seeing a pretty good positive trend on the volume side of foreign exchange. That, of course, is being offset, though, by the difficult markets and the shrinking spreads that we see due to most of the market condition around the world.

Okay, that's helpful. And just lastly, money market fee waivers for the quarter. Can you give us a sense of what they were?

Yes, they were slightly improved, Brian, but I think -- I'm hopeful to not even have to say this anymore, they seem to have dropped, and we seem to be dragging along at this level, both on a year-over-year and sequential basis.

And the absolute level, it's $65 million or something like that?

It's even a little bit more than that. It's about $0.04 to $0.05 impact.

Our next question is from Mike Mayo with CLSA. Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division: Can you describe the behavior of your custody clients? Are they gaining or losing assets in aggregate? With a lot of the money leaving the market with a lot of institutions putting their money just simply into cash, what's the characteristic of your clients?

Mike, it's Tim Keaney here. I would say year-over-year, we've seen more net new. So we see transaction volumes kind of flat to trending up. We see net new organic positive -- year-over-year, we saw a pretty strong outflows. That stopped in the sequential quarter. And the other thing I didn't mention in terms of the new business, and this is a question I think you ask from time to time, about 50% of what we're seeing so far in the first half of this year is net new business. So things, as an example, that clients have done for themselves where they outsource to us, like transfer agency or fund accounting. So I don't know if that answers your question, but that's certainly what we're seeing.

Mike, maybe I can add. Given the size of our book and the number of clients we have, if somebody changes their asset allocation and they switch from equities to fixed income or to cash, it's still going to stay within the family. We are seeing more cash balances just because people are taking a less risky attitude towards the marketplace. Earlier in the year, we saw more flows into equities. And more lately, we've seen more flows into cash. Now with cash around the world earning close to 0, that's becoming problematic for them. But I think the size of our book and the breadth of our clients, it seems to move from one category to the other. But, Curtis, you're one of the largest asset managers on the planet. How do you think about it? How do you -- what are you seeing in terms of your activity?

Yes, so Mike, Curtis Arledge. I would say there are sort of 3 major trends that I would describe investors are focused on. We absolutely have seen clients who might, in the past, have owned equities increase the asset allocation to fixed income. Many times, that is a defensive move. It's also a move to the, in some cases, more in line with their liabilities, which are more fixed-income in nature. So that's been one significant trend. I say another major trend has been people who may have de-risked, gone to cash or to more defensive positions, have really spent a lot of time looking for real-return, absolute-return investments where they can get a generally higher level of total return but really manage the downside volatility. So investors are looking at investment offerings where they may not have as much upside, but the benefit of giving away some upside is that they take less downside risk. And we've actually seen pretty meaningful discussions and inflows into those types of investment offerings. So I think that's -- those are 2 kind of answers to the what are people doing from a defensive perspective. I'd say another, the last thing I would point to is that there have been pretty meaningful flows in conversations with clients about diversifying their portfolios globally. So really I think clients are very aware of the debt situation in advanced economies, and that happens to be where they have the preponderance of their portfolios. So there's been more discussion about diversifying internationally especially movements towards countries where there is some real economic growth. So those are sort of the major, I'd describe it as the sort of the very large picture of major things. Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division: Gerald, you opened your comments saying that you're not going to go outside your risk parameters, kind of implying still a risk-off mentality. What are the early indicators that would tell you to start taking more risk?

That's a very interesting question, Mike. Europe is still an absolute mess. I can't describe it any other way. And so, given the kinds of deposits that we have in Europe, then, in euro dollars and euro currency, that's where we're probably most challenged, because simply putting money to work in euro land, given the environment, has been a real challenge for us. That's why we're looking at other parts of the world for -- whether it's trade finance or other types of secured fundings. Those are the categories that are still within our risk appetite that will allow us for some investment opportunities. And so things like trade finance, secured repos in other parts of the world, increasing some of our lines there to offset what I think is a very negative environment in Europe. Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division: And then lastly a follow-up on the capital question. So you have a new ratio for the Basel III Tier 1 common ratio due to some changes. Is this it? Are we done? Or could there be some additional tweaks that would cause you to modify that ratio either up or down?

Yes, I wouldn't -- you got to remember, this is a notice for proposed rule making. It is not the final rule. And so there are a couple of elements in that rule that are out for discussion, and it's certainly possible that the regulators would revise this somewhat. Whether it would be to the good or the bad is impossible for me to protect -- predict, Mike. And this is our best estimate of our current interpretation of the rule, so it could be tweaked a little bit.

Our next question is from Ken Usdin with Jefferies. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: My first question, just to follow up on the Asset Servicing comments, there's good pipelines, there's good builds, but the line item, just core Asset Servicing was down a few million sequentially. I'm just wondering if you could tease out the market impact from the transactional impact and may be some color on what's going on in broker-dealer services within?

Tim Keaney here. Just on the Asset Servicing, one thing that's -- I just brought your attention that Todd might have made reference to is we had a pretty significant amount of drop in reimbursements. So clients where we would have been charging them for mailing or postage that have internalized that, there was a big drop in reimbursements, both year-on-year and sequentially. That's not bad news at all actually, because that's offset one for one in the expense line, so you're not seeing that. So what you would really be doing is seeing kind of net new business and organic growth making up for soft markets. I think that's the general theme on market and currency, both sequentially and year-on-year.

There is a slight, Ken, there is a slight currency, negative currency impact in revenue that's not quite offset fully in expenses. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Okay. My second question is to follow up on the legal questions, can you give us an idea of what that possible estimatable number would be, the one that we usually get in the queue just with regards to how the charge came through and then any adds to it? Can you give us a sense of how that sets up? I still think there's a lot of questions about still the potential legal risk and incremental charges that could still happen from here.

Yes, I think you're referring to what we call the reasonable, reasonably possible disclosure. And we would think that it's likely to decline. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: By the magnitude of the charge? Or hard to say if there's other things still coming in?

Well, we'll give it to you shortly, so I think we're in the process of developing that now. So it's a little bit early for me to say that, Ken. But what I can say is I think we've got quite a few matters behind us in this corner, and we're feeling a lot better. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Got you. Can you quickly just remind us what the accretion benefit was this quarter versus the 81 last?

Yes, it was about -- I think it was about $7 million to $8 million less, Ken. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Okay, got it.

And the guidance I tried to give there is I would expect as we look forward the next couple of quarters that it would burn off at about $5 million-a-quarter rate. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Right, okay. And then just regarding the Other, in clearing services, DARTS were down, but you had still pretty good performance here. I'm just wondering for an update on that business. Is there still good pipeline of conversions just underlying trends in that part of the business?

Yes, it's Brian Shea. We benefited, as I mentioned before, from just some asset gathering and growth in the underlying mutual fund based on the underlying number of individual investments that we custody. And so we're seeing essentially a record level of individual lessees in [ph] custody, and we closed the second quarter with over $1 trillion in assets and custody overall with Pershing globally. In terms of the pipeline, the pipeline is solid, and given the environment, while DARTS are off and there's pressure on broker-dealer profitability all across the industry, in one way, that's a possible silver lining for us in the sense that more self-clearing firms evaluate moving to a variable-cost clearing platform and model. So we do see a reasonable pipeline of firms that are engaged with us and consider Pershing as their clearing partner, and so we feel reasonably good about that. And we'll have some decent third quarter conversions coming up. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Okay. And last quick one, just on FX, you did have the nice sequential bump. Any comments on just the makeup of your FX results? Any switching between direct and indirect or in relative profitability within?

No, not really, Ken. We benefited from some volume increase in the quarter. Obviously, the volatility is still pretty low and quite low in the marketplace. But we had some new service offerings which are helping capture some of that volume, and we're continuing to offer increased capabilities to capture that.

Our final question today is from Gerard Cassidy with RBC.

The question I had, Todd, you referenced that the net interest revenue was adversely impacted by narrower spreads and lower accretion. But you also were a little disappointed that you weren't able to put the deposits to work fast enough in secured loans and securities. On the secured loan side, what are you guys seeing? Is it more challenging to put it to work in certain industries? Or what are you seeing on the loan side?

Yes. I would say that it's probably taking us a little longer time to have the team in place, the collateral monitoring in place that we look forward for that and also signing the clients up. There's good interest there, but that's probably primarily what's driving it. So I'd say we're only about 50% of the target we wanted to be at this point. One other point I want to make sure, Gerard, that's clear is with the ECB cuts, we did have money since I've mentioned sitting at the ECB. And that will have a little bit of a headwind. I think we can still overcome that with the additional actions that we plan to take. And if we did nothing, that could be as much as $20 million to $25 million in the second half negative to us. So we are considering options, including the possibility if we see a further buildup in deposits of maybe even charging a negative rate or imposing some kind of a charge on deposits in euros.

Okay. And on the loans, when you're at 50% of where you would have liked to have been or thereabouts, is it more in sectors like telecommunications or real estate, that type of lending versus financial services lending?

It's mostly in the financial services space where we're getting good market, money-market-related types of collateral that we can mark on a daily basis and margin on a daily basis.

And Gerard, it's really relatively short-term secured financings with securities that we can understand and mark and with counterparties that we feel very confident with. So it's not traditional commercial bank lending.

This does conclude the question-and-answer session. I would now like to turn the call back over to speakers for closing comments.

Well, great. Thanks, everybody, for joining us. And I really appreciate it. And if you have further questions, Andy Clark [indiscernible] are prepared to answer all your questions, and look forward to engaging with you in the near term. Thanks a lot, everybody.

Thank you. If there are any additional questions or comments, you may contact Mr. Andy Clark at (212) 635-1803. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating.