MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK MANAGEMENT provides oversight, reporting and monitoring of commercial underwriting and credit administration processes. The Risk Strategies and Reporting department  is also responsible for the economic capital program;  Managing risk is an essential component of successfully operating  a financial services company. The Bancorp’s risk management  approach includes processes for identifying, assessing, managing,  monitoring and reporting risks. The ERM division, led by the  Bancorp’s Chief Risk Officer, ensures the consistency and  adequacy of the Bancorp’s risk management approach within the  structure of the Bancorp’s affiliate operating model. In addition,  the Internal Audit division provides an independent assessment of  the Bancorp’s internal control structure and related systems and  processes. The assumption of risk requires robust and active risk  management practices that comprise an integrated and comprehensive set of activities, measures and strategies that apply  to the entire organization. The Bancorp has established a Risk  Appetite Framework that provides the foundations of corporate  risk capacity, risk appetite and risk tolerances. The Bancorp’s risk  capacity is represented by its available financial resources. Risk  capacity sets an absolute limit on risk-assumption in the Bancorp’s  annual and strategic plans. The Bancorp’s policy currently  discounts its risk capacity by five percent to provide a buffer; as a  result, the Bancorp’s risk appetite is limited by policy to 95% of its  risk capacity.  Economic capital is the amount of unencumbered financial  resources necessary to support the Bancorp’s risks. The Bancorp  measures economic capital under the assumption that it expects to  maintain debt ratings at strong investment grade levels over time.  The Bancorp’s capital policies require that the economic capital  necessary in its business not exceed its risk capacity less the  aforementioned buffer.  Risk appetite is the aggregate amount of risk the Bancorp is  willing to accept in pursuit of its strategic and financial objectives.  By establishing boundaries around risk taking and business  decisions, and by incorporating the needs and goals of its  shareholders, regulators, rating agencies and customers, the  Bancorp’s risk appetite is aligned with its priorities and goals. Risk  tolerance is the maximum amount of risk applicable to each of the  eight specific risk categories included in its Enterprise Risk  Management Framework. This is expressed primarily in qualitative  terms. The Bancorp’s risk appetite and risk tolerances are  supported by risk targets and risk limits. Those limits are used to  monitor the amount of risk assumed at a granular level. The risks faced by the Bancorp include, but are not limited to,  credit, market, liquidity, operational, regulatory compliance, legal,  reputational and strategic. Each of these risks is managed through  the Bancorp’s risk program. ERM includes the following key  functions:  Risk management oversight and governance is provided by  the Risk and Compliance Committee of the Board of Directors  and through multiple management committees whose membership includes a broad cross-section of line of business,  affiliate and support representatives. The Risk and Compliance  Committee of the Board of Directors consists of five outside  directors and has the responsibility for the oversight of risk  management for the Bancorp, as well as for the Bancorp’s overall  aggregate risk profile. The Risk and Compliance Committee of the  Board of Directors has approved the formation of key management governance committees that are responsible for  evaluating risks and controls. The primary committee responsible  for the oversight of risk management is the ERMC. Committees  accountable to the ERMC, which support the core risk programs,  are the Corporate Credit Committee, the Operational Risk  Committee, the Management Compliance Committee, the Executive Asset Liability Management Committee and the  Enterprise Marketing Committee. Other committees accountable  to the ERMC oversee the ALLL, capital and community  reinvestment act/fair lending functions. There are also new  products and initiatives processes applicable to every line of  business to ensure an appropriate standard readiness assessment is  performed before launching a new product or initiative. Significant risk policies approved by the management governance  committees are also reviewed and approved by the Risk and  Compliance Committee of the Board of Directors.  Finally, Credit Risk Review is an independent function  responsible for evaluating the sufficiency of underwriting, documentation and approval processes for consumer and commercial credits, the accuracy of risk grades assigned to  48 Fifth Third Bancorp  • Consumer Credit Risk Management provides safety and  soundness within an independent management framework  that supports the Bancorp’s consumer loan growth  strategies, ensuring portfolio optimization, appropriate  risk controls and oversight, reporting, and monitoring of  underwriting and credit administration processes;  • Operational Risk Management works with affiliates and  lines of business to maintain processes to monitor and  manage all aspects of operational risk including ensuring  consistency in application of operational risk programs  and Sarbanes-Oxley compliance;  • Bank Protection oversees and manages fraud prevention and detection and provides investigative and  recovery services for the Bancorp;  • Capital Markets Risk Management is responsible for  instituting, monitoring, and reporting appropriate trading  limits, monitoring liquidity, interest rate risk, and risk  tolerances within Treasury, Mortgage, and Capital Markets  groups and utilizing a value at risk model for Bancorp  market risk exposure;  • Regulatory Compliance Risk Management ensures that  processes are in place to monitor and comply with federal  and state banking regulations, including fiduciary compliance processes. The function also has the responsibility for maintenance of an enterprise-wide  compliance framework; and  • The ERM division creates and maintains other functions, committees or processes as are necessary to  effectively manage risk throughout the Bancorp.  • Enterprise Risk Management Programs is responsible  for developing and overseeing the implementation of risk  programs and reporting that facilitate a broad integrated  view of risk. The department also leads the ongoing  development of a strong risk management culture and the  framework, policies and committees that support effective  risk governance;  • Commercial Credit Risk Management provides safety  and soundness within an independent portfolio management framework that supports the Bancorp’s  commercial loan growth strategies and underwriting  practices, ensuring portfolio optimization and appropriate  risk controls;  • Risk Strategies and Reporting is responsible for quantitative analysis needed to support the commercial  dual grading system, ALLL methodology and analytics  needed to assess credit risk and develop mitigation  strategies related to that risk. The department also 