Ally Bank 2012 Annual Report Download - page 167

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Compliance with evolving capital requirements is a strategic priority for Ally. We expect to be in compliance with all applicable
requirements within the established timeframes.
International Banks, Finance Companies, and Other Foreign Operations
Certain of our foreign subsidiaries operate in local markets as either banks or regulated finance companies and are subject to regulatory
restrictions. These regulatory restrictions, among other things, require that our subsidiaries meet certain minimum capital requirements and
may restrict dividend distributions and ownership of certain assets. Total assets of our regulated international banks and finance companies
were approximately $15.3 billion and $13.6 billion at December 31, 2012 and 2011, respectively. In addition, the Bank Holding Company Act
of 1956 imposes restrictions on Ally's ability to invest equity abroad without FRB approval. Many of our other operations are also heavily
regulated in many jurisdictions outside the United States.
Depository Institutions
Ally Bank is a state nonmember bank, chartered by the State of Utah, and subject to the supervision of the FDIC and the Utah
Department of Financial Institutions. Ally Bank's deposits are insured by the FDIC, and Ally Bank is required to file periodic reports with the
FDIC concerning its financial condition. Total assets of Ally Bank were $94.8 billion and $85.3 billion at December 31, 2012 and 2011,
respectively. Ally Bank is subject to Utah law (and, in certain instances, federal law) that places restrictions and limitations on the amount of
dividends or other distributions. Ally Bank did not make any dividend or other distributions to Ally in 2012 or 2011.
The FRB requires banks to maintain minimum average reserve balances. The amount of the required reserve balance for Ally Bank was
$214 million and $205 million at December 31, 2012 and 2011, respectively.
U.S. Mortgage Business
Our U.S. mortgage business is subject to extensive federal, state, and local laws, rules, and regulations, in addition to judicial and
administrative decisions that impose requirements and restrictions on this business. As a Federal Housing Administration-approved lender,
certain of our U.S. mortgage subsidiaries are required to submit audited financial statements to the Department of Housing and Urban
Development on an annual basis. The U.S. mortgage business is also subject to examination by the Federal Housing Commissioner to assure
compliance with Federal Housing Administration regulations, policies, and procedures. The federal, state, and local laws, rules, and
regulations to which our U.S. mortgage business is subject, among other things, impose licensing obligations and financial requirements; limit
the interest rates, finance charges, and other fees that can be charged; regulate the use of credit reports and the reporting of credit information;
impose underwriting requirements; regulate marketing techniques and practices; require the safeguarding of nonpublic information about
customers; and regulate servicing practices, including the assessment, collection, foreclosure, claims handling, and investment and interest
payments on escrow accounts.
Certain of our mortgage subsidiaries are required to satisfy regulatory net worth requirements. Failure to meet minimum capital
requirements can initiate certain mandatory actions by federal, state, and foreign agencies that could have a material effect on our results of
operations and financial condition. These entities were in compliance with these requirements at December 31, 2012.
Insurance Companies
Our Insurance operations are subject to certain minimum aggregate capital requirements, net asset and dividend restrictions under
applicable state and foreign insurance law, and the rules and regulations promulgated by various U.S. and foreign regulatory agencies. Under
various state and foreign insurance regulations, dividend distributions may be made only from statutory unassigned surplus, with approvals
required from the regulatory authorities for dividends in excess of certain statutory limitations. At December 31, 2012, the maximum dividend
that could be paid by the U.S. insurance subsidiaries over the next twelve months without prior statutory approval was $118 million.
22. Derivative Instruments and Hedging Activities
We enter into interest rate and foreign-currency swaps, futures, forwards, options, and swaptions in connection with our market risk
management activities. Derivative instruments are used to manage interest rate risk relating to specific groups of assets and liabilities,
including investment securities, MSRs, and debt. In addition, we use foreign exchange contracts to mitigate foreign-currency risk associated
with foreign-currency-denominated investment securities, foreign-currency-denominated debt, foreign exchange transactions, and our net
investment in foreign subsidiaries. Our primary objective for utilizing derivative financial instruments is to manage market risk volatility
associated with interest rate and foreign-currency risks related to the assets and liabilities.
Interest Rate Risk
We execute interest rate swaps to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate
and certain variable-rate instruments to a fixed rate. We monitor our mix of fixed- and variable-rate debt in relation to the rate profile of our
assets. When it is cost-effective to do so, we may enter into interest rate swaps to achieve our desired mix of fixed- and variable-rate debt.
Derivatives qualifying for hedge accounting consist of fixed-rate debt obligations in which receive-fixed swaps are designated as hedges of
specific fixed-rate debt obligations. Other derivatives qualifying for hedge accounting consist of an existing variable-rate liability in which
pay-fixed swaps are designated as hedges of the expected future cash flows in the form of interest payments on the outstanding borrowing
associated with Ally Bank's secured floating-rate credit facility.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K