PNC Bank 2005 Annual Report Download - page 11

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The performance of our fund servicing business may be
adversely affected by changes in investor preferences, or
changes in existing or potential fund servicing clients or
alternative providers.
Fund servicing fees are primarily derived from the market
value of the assets and the number of shareholder accounts
that we administer for our clients. The performance of our
fund processing business is thus partially dependent on the
underlying performance of its fund clients and, in particular,
their ability to attract and retain customers. Changes in
interest rates or a sustained weakness, weakening or volatility
in the debt and equity markets could (in addition to affecting
directly the value of assets administered as discussed above)
influence an investor’ s decision to invest or maintain an
investment in a particular mutual fund or other pooled
investment product. Other factors beyond our control may
impact the ability of our fund clients to attract or retain
customers or customer funds, including changes in preferences
as to certain investment styles. Further, to the extent that our
fund clients’ businesses are adversely affected by ongoing
governmental investigations into the practices of the mutual
and hedge fund industries, our fund processing business’
results also could be adversely impacted. As a result of these
types of factors, fluctuations may occur in the level or value of
assets for which we provide processing services. In addition,
this regulatory and business environment is likely to continue
to result in operating margin pressure for our various services.
As a regulated financial services firm, we are subject to
numerous governmental regulations and to comprehensive
examination and supervision by regulators, which affects our
business as well as our competitive position.
PNC is a bank and financial holding company and is subject to
numerous governmental regulations involving both its
business and organization. Our businesses are subject to
regulation by multiple bank regulatory bodies as well as
multiple securities industry regulators. Applicable laws and
regulations restrict our ability to repurchase stock or to receive
dividends from bank subsidiaries and impose capital adequacy
requirements. They also restrict permissible activities and
investments and require compliance with protections for loan,
deposit, brokerage, fiduciary, mutual fund and other
customers, and for the protection of customer information,
among other things. The consequences of noncompliance can
include substantial monetary and nonmonetary sanctions as
well as damage to our reputation and business.
In addition, we are subject to comprehensive examination and
supervision by banking and other regulatory bodies.
Examination reports and ratings (which often are not publicly
available) and other aspects of this supervisory framework can
materially impact the conduct, growth, and profitability of our
businesses.
We discuss these and other regulatory issues applicable to
PNC in the Supervision and Regulation section included in
Item 1 of this Report and in Note 4 Regulatory Matters in the
Notes To Consolidated Financial Statements in Item 8 of this
Report and here by reference.
Over the last several years, there has been an increasing
regulatory focus on compliance with anti-money laundering
laws and regulations, resulting in, amo ng other things, several
significant publicly-announced enforcement actions, including
those relating to Riggs National Corporation. There has also
been a heightened focus recently, by customers and the media
as well as by regulators, on the protection of confidential
customer information. In response to this environment, we are
working to enhance our procedures for compliance with laws
and regulations in these areas. A failure to have adequate
procedures to comply with anti-money laundering laws and
regulations or to protect the confidentiality of customer
information could expose us to damages, fines and regulatory
penalties, which could be significant, and could also injure our
reputation with customers and others with whom we do
business.
Our business and financial performance could be adversely
affected, directly or indirectly, by natural disasters, by
terrorist activities or by international hostilities.
The impact of natural disasters, terrorist activities and
international hostilities cannot be predicted with respect to
severity or duration. However, any of these could impact us
directly (for example, by causing significant damage to our
facilities or preventing us from conducting our business in the
ordinary course), or could impact us indirectly through a direct
impact on our borrowers, depositors, other customers,
suppliers or other counterparties. We could also suffer
adverse consequences to the extent that natural disasters,
terrorist activities or international hostilities affect the
economy and financial and capital markets generally. These
types of impacts could lead, for example, to an increase in
delinquencies, bankruptcies or defaults that could result in our
experiencing higher levels of nonperforming assets, net
charge-offs and provisions for credit losses.
Our ability to mitigate the adverse consequences of such
occurrences is in part dependent on the quality of our
resiliency planning, including our ability to anticipate the
nature of any such event that occurs. The adverse impact of
natural disasters or terrorist activities also could be increased
to the extent that there is a lack of preparedness on the part of
national or regional emergency responders or on the part of
other organizations and businesses that we deal with,
particularly those that we depend upon.
ITEM 1B – UNRESOLVED STAFF COMMENTS
There are no SEC staff comments regarding PNC’ s periodic or
current reports under the Exchange Act that are pending
resolution.
ITEM 2 – PROPERTIES
Our executive and administrative offices are located at One PNC
Plaza, Pittsburgh, Pennsylvania. The thirty-story structure is