PNC Bank 2010 Annual Report Download - page 16
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Please find page 16 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.activities that are determined by the Federal Reserve, in
consultation with the Secretary of the Treasury, to be
“financial in nature or incidental thereto” or are determined by
the Federal Reserve unilaterally to be “complementary” to
financial activities. We became a financial holding company
as of March 13, 2000.
The Federal Reserve is the “umbrella” regulator of a financial
holding company, with its operating entities, such as its
subsidiary broker-dealers, investment managers, investment
companies, insurance companies and banks, also subject to the
jurisdiction of various federal and state “functional” regulators
with normal regulatory responsibility for companies in their
lines of business.
As subsidiaries of a financial holding company under the GLB
Act, our non-bank subsidiaries are generally allowed to
conduct new financial activities or acquire non-bank financial
companies with after-the-fact notice to the Federal Reserve. In
addition, our non-bank subsidiaries (and any financial
subsidiaries of subsidiary banks) are now permitted to engage
in certain activities that were not permitted for banks and bank
holding companies prior to enactment of the GLB Act, and to
engage on less restrictive terms in certain activities that were
previously permitted. Among other activities, we currently
rely on our status as a financial holding company to conduct
merchant banking activities and securities underwriting and
dealing activities.
In addition, the GLB Act permits national banks, such as PNC
Bank, N.A., to engage in expanded activities through the
formation of a “financial subsidiary.” PNC Bank, N.A. has
filed a financial subsidiary certification with the OCC and
currently engages in insurance agency activities through
financial subsidiaries. PNC Bank, N.A. may also generally
engage through a financial subsidiary in any activity that is
financial in nature or incidental to a financial activity. Certain
activities, however, are impermissible for a financial
subsidiary of a national bank, including insurance under-
writing, insurance investments, real estate investment or
development, and merchant banking.
Other Federal Reserve and OCC Regulation. The federal
banking agencies possess broad powers to take corrective
action as deemed appropriate for an insured depository
institution and its holding company. The extent of these
powers depends upon whether the institution in question is
considered “well capitalized,” “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized” or
“critically undercapitalized.” Generally, the smaller an
institution’s capital base in relation to its risk-weighted assets,
the greater the scope and severity of the agencies’ powers,
ultimately permitting the agencies to appoint a receiver for the
institution. Business activities may also be influenced by an
institution’s capital classification. For instance, only a “well
capitalized” depository institution may accept brokered
deposits without prior regulatory approval and an “adequately
capitalized” depository institution may accept brokered
deposits only with prior regulatory approval. At December 31,
2010, PNC Bank, N.A. exceeded the required ratios for
classification as “well capitalized.” For additional discussion
of capital adequacy requirements, we refer you to “Funding
and Capital Sources” in the Consolidated Balance Sheet
Review section of Item 7 of this Report and to Note 21
Regulatory Matters in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
Laws and regulations limit the scope of our permitted
activities and investments. In addition to the activities that
would be permitted to be conducted by a financial subsidiary,
national banks (such as PNC Bank, N.A.) and their operating
subsidiaries may engage in any activities that are determined
by the OCC to be part of or incidental to the business of
banking.
Moreover, examination ratings of “3” or lower, lower capital
ratios than peer group institutions, regulatory concerns
regarding management, controls, assets, operations or other
factors, can all potentially result in practical limitations on the
ability of a bank or bank holding company to engage in new
activities, grow, acquire new businesses, repurchase its stock
or pay dividends, or to continue to conduct existing activities.
The Federal Reserve’s prior approval is required whenever we
propose to acquire all or substantially all of the assets of any
bank or thrift, to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank or
thrift, or to merge or consolidate with any other bank holding
company or thrift holding company. The BHC Act enumerates
the factors the Federal Reserve Board must consider when
reviewing the merger of bank holding companies or the
acquisition of banks. These factors include the competitive
effects of the proposal in the relevant geographic markets; the
financial and managerial resources and future prospects of the
companies and banks involved in the transaction; the
convenience and needs of the communities to be served; and
the records of performance under the Community
Reinvestment Act of the insured depository institutions
involved in the transaction. In cases involving interstate bank
acquisitions, the Board also must consider the concentration of
deposits nationwide and in certain individual states. Our
ability to grow through acquisitions could be limited by these
approval requirements.
At December 31, 2010, PNC Bank, N.A. was rated
“Outstanding” with respect to CRA.
FDIC Insurance. PNC Bank, N.A. is insured by the FDIC and
subject to premium assessments. Regulatory matters could
increase the cost of FDIC deposit insurance premiums to an
insured bank as FDIC deposit insurance premiums are “risk
based.” Therefore, higher fee percentages would be charged to
banks that have lower capital ratios or higher risk profiles.
These risk profiles take into account weaknesses that are
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