AmSouth maintains a capital and dividend policy based on industry standards, regulatory requirements, perceived risk of the various lines of business, and future growth opportunities. At least annually, management reevaluates the policy and presents its findings to the Board of Directors to ensure that the policy continues to support corporate objectives and be consistent with the regulatory environment and changes in market conditions.

At December 31, 2000, AmSouth met or exceeded all of the minimum capital standards for the parent company and its banking subsidiary as established by regulatory requirements and the Company’s capital policy. Refer to Table 11 and Notes 15 and 18 of the Notes to Consolidated Financial Statements for specific information.

Risk Management
Risk identification and management are key elements in the overall management of AmSouth. Management believes the primary risk exposures are interest rate, liquidity and credit risk. Interest rate risk is the risk to NII represented by the impact of higher or lower interest rates.

Liquidity risk is the possibility that the Company will not be able to fund present and future obligations, and credit risk represents the possibility that borrowers may not be able to repay loans. External factors beyond management’s control may from time to time result in losses despite risk management efforts. Some of the more significant processes used to manage and control these risks are described in the following paragraphs.

Asset and Liability Management AmSouth maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in maintaining stability in the NIM under varying interest rate environments. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

Interest Rate Swaps, Caps and Floors Table 12

			Receive Fixed	Pay Fixed		Forward Swaps	Caps &
(In millions)			Rate Swaps	Rate Swaps	Basis Swaps	Pay Fixed	Floors	Total
Balance at January 1, 1998			$ 1,670	$ 256	$ 50	$ 1,350	$ 300	$ 3,626
	Additions		469	300	–	1,300	–	2,069
	Maturities		(130)	(1)	–	(150)	–	(281)
	Calls		(255)	–	–	–	–	(255)
	Terminations		(250)	(50)	(50)	(450)	(300)	(1,100)
Balance at December 31, 1998			1,504	505	–	2,050	–	4,059
	Additions		2,389	–	–	800	–	3,189
	Maturities		(125)	(1)	–	–	–	(126)
	Calls		(450)	–	–	–	–	(450)
	Terminations		–	(504)	–	(2,850)	–	(3,354)
Balance at December 31, 1999			3,318	–	–	–	–	3,318
	Additions		818	–	–	–	–	818
	Maturities		(259)	–	–	–	–	(259)
	Calls		(850)	–	–	–	–	(850)
	Terminations		(360)	–	–	–	–	(360)
Balance at December 31, 2000			$ 2,667	$ –	$ –	$ –	$ –	$ 2,667