CAPITAL ONE FINANCIAL CORP

Payment Networks, Debit Card Interchange Fees and Transaction Processing

On May 18, 2025, the Company consummated the Transaction and acquired, among other things, the Global Payment Network. The Discover Network processes transactions for its Discover-branded credit and debit cards and provides payment transaction processing and settlement services. The PULSE Network operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE Network with access to ATMs domestically and internationally, as well as merchant acceptance throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club-branded charge cards and provide card acceptance services. These Global Payment Network operations are regulated by certain federal and state laws, including banking, payment services, privacy and data security laws, and are also subject to examination by the Federal Banking Agencies. In addition, because the Global Payment Network operates globally, certain subsidiaries through which it operates are subject to government regulation, directly or indirectly, in some countries in which we have operations, or cards that are accepted on our networks are issued or accepted. Changes in existing federal, state or foreign regulation of payment networks, including privacy and data security matters and the initiation of government investigations or inquiries, could increase the cost or risk of providing network services, change the competitive environment, or otherwise materially adversely affect our operations.

The Global Payment Network earns fees, which are paid by network participants (primarily acquirers, merchants and issuers), for each transaction on the Global Payment Network. Additionally, for transactions on Bank-issued credit and debit cards processed on the Global Payment Network, a portion of the amount that merchants pay to the Global Payment Network is passed through to the Bank. The Bank is also an issuer of credit and debit cards that use other networks, and for these cards the Bank earns interchange fees, which are paid by merchants, when customers use its cards.

The Federal Reserve’s Regulation II (Debit Card Interchange Fees and Routing) includes a number of requirements for debit cards issued on networks that are not three-party networks, including limits on interchange fees for debit card issuers with over $10 billion in assets and certain requirements related to routing and network exclusivity. The requirements of Regulation II apply to certain activities of the Global Payment Network and third-party issuers that issue debit cards on the Global Payment Network and to the Bank in its role as issuer of debit cards on four-party networks.

Home Lending

Upon consummation of the Transaction, the Company acquired, among other things, Discover’s home lending business. The activities of a home lender are subject to regulation under federal laws, including the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, as well as under various state laws and, in some instances, local laws. These laws generally regulate the manner that home lending and lending-related activities are conducted, including advertising and other consumer disclosures, payments for services and recordkeeping requirements. In the second quarter, we decided to discontinue the home lending business acquired from Discover. As a result of this decision, the Company has accounted for this business as a discontinued operation and all home loans acquired as part of the Transaction were classified as assets of discontinued operations. See “Part I—Item 1. Financial Statements—Note 2—Business Combinations and Discontinued Operations” for additional information.

Resolution and Recovery Planning Update

The Company is required by Section 165(d) of the Dodd-Frank Act to submit to the Federal Reserve and FDIC every three years a resolution plan for orderly resolution in the event it faces material financial distress or failure, with submissions alternating between a full resolution plan and a targeted resolution plan. In addition, the Company may be required to submit an interim update to its resolution plan upon a joint determination of the Federal Reserve and the FDIC, or following material mergers or acquisitions or fundamental changes to the Company’s resolution strategy. As a result of the Transaction, the Federal Reserve and the FDIC in May 2025 required the Company to file an interim update to its resolution plan by October 1, 2025 and extended the Company’s deadline for the next full resolution submission from October 1, 2025 to July 1, 2026.

Stress Capital Buffer Requirement Update

On June 27, 2025, the Federal Reserve released the results of its supervisory stress tests for the 2025 cycle. Based on the Company’s 2025 supervisory stress test results, the Company’s preliminary stress capital buffer requirement for the period beginning on October 1, 2025 through September 30, 2026 is 4.5%. Therefore, the Company’s minimum capital requirements plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are expected to be 9.0%, 10.5% and 12.5%, respectively, for the period from October 1, 2025 through September 30, 2026. The Federal Reserve is expected to provide the Company with its final stress capital buffer requirement by August 31, 2025.

As disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2025 (“Q1 2025 Form 10-Q”) under “Part I—Item 2. MD&A—Supervision and Regulation,” the Federal Reserve issued a notice of proposed rulemaking in April 2025 to amend the calculation of the stress capital buffer requirement. The proposal would average stress test results over two consecutive years for purposes of determining the stress capital buffer requirement. The proposal would also modify the annual effective date of the stress capital buffer requirement from October 1 to January 1. The proposal has not yet been finalized, and our preliminary stress capital buffer requirement disclosed above has been calculated under the current framework and does not reflect the proposed averaging.

We provide additional information on our Supervision and Regulation in our 2024 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation” and in our Q1 2025 Form 10-Qunder “Part I—Item 2. MD&A—Supervision and Regulation.”