Ally Bank 2011 Annual Report Download - page 18

Table of Contents
Ally Financial Inc. • Form 10−K
rules, when implemented, will impose limits on Ally's ability to meet its regulatory capital requirements through the use of MSRs, trust preferred securities,
or other “hybrid” securities, if applicable. Pending final rules for Basel III and subsequent regulatory interpretation, there remains a degree of uncertainty on
the full impact of Basel III. It is currently anticipated that U.S. banking regulators will propose regulations to implement Basel III in 2012.
If we or Ally Bank fail to satisfy regulatory capital requirements, we or Ally Bank may be subject to serious regulatory sanctions ranging in severity
from being precluded from making acquisitions or engaging in new activities to becoming subject to informal or formal supervisory actions by the FRB
and/or FDIC and, potentially, FDIC receivership of Ally Bank. If any of these were to occur, such actions could prevent us from successfully executing our
business plan and have a material adverse effect on our business, results of operations, and financial position.
The actions of the FRB and international central banking authorities directly impact our cost of funds for lending, capital raising, and investment
activities and may impact the value of financial instruments we hold. In addition, such changes in monetary policy may affect the credit quality of our
customers. Changes in domestic and international monetary policy are beyond our control and difficult to predict.
Future consumer or mortgage legislation could harm our competitive position.
In addition to the recent enactment of the Dodd−Frank Act, various legislative bodies have also recently been considering altering the existing
framework governing creditors' rights and mortgage products including legislation that would result in or allow loan modifications of various sorts. Such
legislation may change banking statutes and the operating environment in substantial and unpredictable ways. If enacted, such legislation could increase or
decrease the cost of doing business; limit or expand permissible activities; or affect the competitive balance among banks, savings associations, credit
unions, and other financial institutions. We cannot predict whether new legislation will be enacted, and if enacted, the effect that it or any regulations would
have on our activities, financial condition, or results of operations.
Ally and its subsidiaries are or may become involved from time to time in information−gathering requests, investigations, and proceedings by
government and self−regulatory agencies which may lead to adverse consequences.
Ally and its subsidiaries, including Ally Bank, are or may become involved from time to time in information−gathering requests, reviews,
investigations, and proceedings (both formal and informal) by government and self−regulatory agencies, including the FRB, FDIC, Utah DFI, CFPB, SEC,
and the Federal Trade Commission regarding their respective operations. Such requests include subpoenas from each of the SEC and the U.S. Department of
Justice, served on Ally Financial Inc. and GMAC Mortgage LLC, respectively. Beginning in December 2010 and continuing through 2011, a series of
subpoenas were received from the SEC, seeking information about various aspects of the process surrounding securitizations of residential mortgages with
which certain of our mortgage subsidiaries were involved as sponsor or servicer. The subpoena received from the U.S. Department of Justice includes a
broad request for documentation and other information in connection with its investigation of potential fraud related to the origination and/or underwriting
of mortgage loans. These subpoenas, or any other investigation or information−gathering request, may result in material adverse consequences including
without limitation, adverse judgments, settlements, fines, penalties, injunctions, or other actions.
Our business, financial position, and results of operations could be adversely affected by the impact of affiliate transaction restrictions imposed in
connection with certain financing transactions.
Certain transactions between Ally Bank and any of its nonbank “affiliates,” including but not limited to Ally Financial Inc. and ResCap are subject to
federal statutory and regulatory restrictions. Pursuant to these restrictions, unless otherwise exempted, “covered transactions,” including Ally Bank's
extensions of credit to and asset purchases from its nonbank affiliates, generally (1) are limited to 10% of Ally Bank's capital stock and surplus with respect
to transactions with any individual affiliate, with an aggregate limit of 20% of Ally Bank's capital stock and surplus for all affiliates and all such
transactions; (2) in the case of certain credit transactions, are subject to stringent collateralization requirements; (3) in the case of asset purchases by Ally
Bank, may not involve the purchase of any asset deemed to be a “low quality asset” under federal banking guidelines; and (4) must be conducted in
accordance with safe−and−sound banking practices (collectively, the Affiliate Transaction Restrictions). Under the Dodd−Frank Act, among other changes
to Sections 23A and 23B of the Federal Reserve Act, credit exposures resulting from derivatives transactions and securities lending and borrowing
transactions will be treated as “covered transactions.” Furthermore, there is an “attribution rule” that provides that a transaction between Ally Bank and a
third party must be treated as a transaction between Ally Bank and a nonbank affiliate to the extent that the proceeds of the transaction are used for the
benefit of, or transferred to, a nonbank affiliate of Ally Bank. Retail financing transactions by Ally Bank involving vehicles which are floorplan financed by
Ally Financial Inc. are subject to the Affiliate Transaction Restrictions because the proceeds of the retail financings are deemed to benefit, and are
ultimately transferred to, Ally.
Historically, the FRB was authorized to exempt, in its discretion, transactions or relationships from the requirements of these rules if it found such
exemptions to be in the public interest and consistent with the purposes of the rules. As a result of the Dodd−Frank Act, exemptions now may be granted by
the FDIC if the FDIC and FRB jointly find that the exemption is in the public interest and consistent with the purposes of the rules, and the FDIC finds that
the exemption does not present an unacceptable risk to the Deposit Insurance Fund. The FRB granted several such exemptions to Ally Bank in the past.
However, the existing exemptions are subject to various conditions and, particularly in light of the statutory changes made by the Dodd−Frank Act, any
requests for future exemptions may not be granted. Moreover, these limited exemptions generally do not encompass consumer leasing or used vehicle
financing. Since there is no assurance that Ally Bank will be able to obtain future exemptions or waivers with respect to these restrictions, the ability to
grow Ally Bank's business will be affected by the Affiliate Transaction Restrictions and the conditions set forth in the existing exemption letters.
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