KeyBank 2014 Annual Report Download - page 29

The SCCL and the early remediation requirements published in January 2012 by the Federal Reserve as a
proposed rule, however, were not included as part of the March 2014 final rule. The Federal Reserve has
indicated that is conducting a quantitative impact study and will take into account the Basel Committee’s April
2014 large exposures regime before finalizing the SCCL. It is unclear when the Federal Reserve will finalize the
early remediation requirements. No credit exposure reporting requirements, which must be implemented jointly
by the Federal Reserve and FDIC, have yet been proposed. The Federal Reserve has indicated that both the
Federal Reserve and FDIC recognize that such reports would be most useful and complete if developed in
conjunction with the SCCL.
Bank transactions with affiliates
Federal banking law and regulation imposes qualitative standards and quantitative limitations upon certain
transactions by a bank with its affiliates, including the bank’s parent BHC and certain companies the parent BHC
may be deemed to control for these purposes. Transactions covered by these provisions must be on arm’s-length
terms, and cannot exceed certain amounts which are determined with reference to the bank’s regulatory capital.
Moreover, if the transaction is a loan or other extension of credit, it must be secured by collateral in an amount
and quality expressly prescribed by statute, and if the affiliate is unable to pledge sufficient collateral, the BHC
may be required to provide it. These provisions materially restrict the ability of KeyBank to fund its affiliates,
including KeyCorp, KeyBanc Capital Markets Inc., certain of the Victory mutual funds with which we continue
to have a relationship, and KeyCorp’s nonbanking subsidiaries engaged in making merchant banking investments
(and certain companies in which these subsidiaries have invested).
Provisions added by the Dodd-Frank Act expanded the scope of (i) the definition of affiliate to include any
investment fund having any bank or BHC-affiliated company as an investment adviser, (ii) credit exposures
subject to the prohibition on the acceptance of low-quality assets or securities issued by an affiliate as collateral,
the quantitative limits, and the collateralization requirements to now include credit exposures arising out of
derivative, repurchase agreement, and securities lending/borrowing transactions, and (iii) transactions subject to
quantitative limits to now also include credit collateralized by affiliate-issued debt obligations that are not
securities. In addition, these provisions require that a credit extension to an affiliate remain secured in accordance
with the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at
the inception or upon material modification of the transaction. These provisions also raise significantly the
procedural and substantive hurdles required to obtain a regulatory exemption from the affiliate transaction
requirements. While these provisions became effective on July 21, 2012, the Federal Reserve has not yet issued a
proposed rule to implement them.
New assessments, fees and other charges
Certain provisions of the Dodd-Frank Act require or authorize certain U.S. governmental departments, agencies
and instrumentalities to collect new or higher assessments, fees and other charges from BHCs and banks, like
KeyCorp and KeyBank. The U.S. Treasury has established an assessment schedule to collect from SIFIs,
including KeyCorp, based on their average total consolidated assets semiannual assessments to pay the expenses
of the OFR, including the expenses of the FSOC and certain expenses for implementing the orderly liquidation
activities of the FDIC. The Federal Reserve has established an annual assessment upon SIFIs, including
KeyCorp, based on their average total consolidated assets for the Federal Reserve’s examination, supervision,
and regulation of such companies. The OCC has changed its semi-annual assessment upon large national banks,
like KeyBank, to reflect its Dodd-Frank Act authority to do so.
ITEM 1A. RISK FACTORS
As a financial services organization, we are subject to a number of risks inherent in our transactions and present
in the business decisions we make. Described below are the primary risks and uncertainties that if realized could
have a material and adverse effect on our business, financial condition, results of operations or cash flows, and
our access to liquidity. The risks and uncertainties described below are not the only risks we face.
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