Northern Trust : Fourth Quarter 2020

The Northern Trust Company, Canada

Basel III Pillar lll Disclosure

December 31, 2020

January 28, 2021

Subject to Board Approval

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CONTENTS

THE NORTHERN TRUST COMPANY, CANADA OVERVIEW AND SCOPE OF APPPLICATION ..……….	3
LOCATION AND FREQUENCY OF DISCLOSURE …………………………………………………………………………..	4
CAPITAL STRUCTURE ………………………………………………………………………………………………………………..	5
CAPITAL ADEQUACY …………………………………………………………………………………………………………………	5
CREDIT RISK ……………………………………………………………………………………………………………………………..	8
EXPOSURES RELATED TO COUNTERPARTY CREDIT RISK ……………………………………………………………	9
MARKET RISK AND LIQUIDITY RISK …………………………………………………………………………………………..	10
OPERATIONAL RISK ………………………………………………………………………………………………………………….	11
INTEREST RATE RISK IN THE BANKING BOOK ..………………………………………………………………………….	11

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THE NORTHERN TRUST COMPANY, CANADA OVERVIEW & SCOPE OF APPLICATION

This document presents the capital structure and capital adequacy calculations of The Northern Trust Company, Canada (TNTCC) based on guidelines published by the Basel Committee on Banking Supervision (Basel) and the Office of the Superintendent of Financial Institutions (OSFI). TNTCC complies with the Basel III framework as it applies:

• Pillar 1: Minimum Capital and Liquidity Requirements - TNTCC has adopted the Standardized Approach to Credit Risk and the Basic Indicator Approach to Operational Risk to determine the company's capital requirements under Basel Capital Adequacy Reporting (BCAR);
• Pillar 2: Prudential and Risk Management Expectations and the Supervisory Oversight Process
  - TNTCC completes an Internal Capital Adequacy Assessment Process (ICAAP) annually, with the results reviewed and approved by TNTCC's Board of Directors; and
• Pillar 3: Public Disclosure - this Pillar 3 disclosure document provides information on TNTCC's risk management objectives and policies, its capital position, its approach to assessing the adequacy of its capital and exposure to material risks.

TNTCC was, by Letters Patent of Continuance, continued as a trust company under the Trust and Loan Companies Act (Canada) in July 1993 and OSFI issued an order approving TNTCC to commence and carry out trust business in January 1994. TNTCC is a wholly owned subsidiary of The Northern Trust Company (TNTC), a corporation organised under the banking laws of the State of Illinois, United States of America. Northern Trust Corporation (NTC), a financial holding company based in Chicago, Illinois, is the ultimate parent of TNTC. TNTCC is not a Domestic-systemically important bank.

NTC's business activities in Canada are comprised of global custody and associated services, securities lending, asset management and fund administration services. These services are delivered through three regulated Canadian entities: TNTCC, the Canada Branch of TNTC (Canada Branch), an authorized foreign bank branch under the Bank Act (Canada), and NT Global Advisors, Inc. (NTGA Canada).

TNTCC has adopted a Capital and Liquidity Management Policy (CLM Policy) to ensure that it always maintains sufficient regulatory capital and liquidity, and manages its assets and liabilities in accordance with the Asset and Liability Management Policy (ALM Policy). These two policies provide the basis for TNTCC's capital and liquidity risk management and the guideline to govern TNTCC's investments.

TNTCC currently does not hold any client deposits or engage in any activities that result in off-balance sheet exposures. Accordingly, its capital and liquidity requirements are stable and predictable.

Northern Trust Risk Management

TNTC has established an integrated Enterprise Risk Management Framework (ERM) that provides for consistent risk management practices throughout the organization, including TNTCC, and acts as a

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reference of how various components are defined, aligned and linked to capital and liquidity adequacy. It allows for active management of risk in conjunction with defined risk appetites.

TNTCC's risk appetite is low to moderate and its attitude toward risk is best described as judicious, with an objective of long-term stability. TNTCC's very strong capital base and liquid balance sheet enable it to pursue strategic growth opportunities and manage unexpected events. Risk is effectively managed by a comprehensive risk management program which involves related Northern Trust entities, as required.

This report is unaudited and the amounts are presented in Thousands of Canadian Dollars, unless otherwise disclosed. Financial results are prepared in accordance with International Financial Reporting Standards (IFRS).

LOCATION AND FREQUENCY OF DISCLOSURE

This quarterly disclosure is posted and publicly available on Northern Trust's website (www.northerntrust.com).

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