PNC Bank 2010 Annual Report Download - page 188
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Please find page 188 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.In the ordinary course of business, we enter into certain
types of agreements that include provisions for indemnifying
third parties. We also enter into certain types of agreements,
including leases, assignments of leases, and subleases, in
which we agree to indemnify third parties for acts by our
agents, assignees and/or sublessees, and employees. We
also enter into contracts for the delivery of technology
service in which we indemnify the other party against claims
of patent and copyright infringement by third parties. Due
to the nature of these indemnification provisions, we
cannot calculate our aggregate potential exposure under
them.
We engage in certain insurance activities which require our
employees to be bonded. We satisfy this bonding requirement
by issuing letters of credit which were insignificant in amount
at December 31, 2010.
In the ordinary course of business, we enter into contracts with
third parties under which the third parties provide services on
behalf of PNC. In many of these contracts, we agree to
indemnify the third party service provider under certain
circumstances. The terms of the indemnity vary from contract
to contract and the amount of the indemnification liability, if
any, cannot be determined.
We are a general or limited partner in certain asset
management and investment limited partnerships, many of
which contain indemnification provisions that would require
us to make payments in excess of our remaining funding
commitments. While in certain of these partnerships the
maximum liability to us is limited to the sum of our unfunded
commitments and partnership distributions received by us, in
the others the indemnification liability is unlimited. As a
result, we cannot determine our aggregate potential exposure
for these indemnifications.
Pursuant to their bylaws, PNC and its subsidiaries provide
indemnification to directors, officers and, in some cases,
employees and agents against certain liabilities incurred as a
result of their service on behalf of or at the request of PNC
and its subsidiaries. PNC and its subsidiaries also advance
on behalf of covered individuals costs incurred in connection
with certain claims or proceedings, subject to written
undertakings by each such individual to repay all amounts
advanced if it is ultimately determined that the individual is
not entitled to indemnification. We generally are responsible
for similar indemnifications and advancement obligations
that companies we acquire had to their officers, directors
and sometimes employees and agents at the time of
acquisition. We advanced such costs on behalf of several
such individuals with respect to pending litigation or
investigations during 2010. It is not possible for us to
determine the aggregate potential exposure resulting from
the obligation to provide this indemnity or to advance such
costs.
In connection with the sale of GIS, PNC agreed to continue to
act for the benefit of GIS as securities lending agent for certain
of GIS’s clients. In such role, we provide indemnification to
those clients against the failure of the borrowers to return the
securities. The market value of the securities lent is fully
secured on a daily basis; therefore, the exposure to us is limited
to temporary shortfalls in the collateral as a result of short-term
fluctuations in trading prices of the loaned securities. At
December 31, 2010, the total maximum potential exposure as a
result of these indemnity obligations was $6.3 billion, although
the collateral at the time exceeded that amount. In addition, the
purchaser of GIS, The Bank of New York Mellon Corporation,
has entered into an agreement to indemnify PNC with respect to
such exposure on the terms set forth in such indemnification
agreement. Also in connection with the GIS divestiture, PNC
has agreed to indemnify the buyer generally as described above.
V
ISA
I
NDEMNIFICATION
Our payment services business issues and acquires credit and
debit card transactions through Visa U.S.A. Inc. card
association or its affiliates (Visa).
In October 2007, Visa completed a restructuring and issued
shares of Visa Inc. common stock to its financial institution
members (Visa Reorganization) in contemplation of its initial
public offering (IPO). As part of the Visa Reorganization, we
received our proportionate share of a class of Visa Inc.
common stock allocated to the US members. Prior to the IPO,
the US members, which included PNC, were obligated to
indemnify Visa for judgments and settlements related to the
specified litigation. We continue to have an obligation to
indemnify Visa for judgments and settlements for the
remaining specified litigation.
As a result of the acquisition of National City, we became
party to judgment and loss sharing agreements with Visa and
certain other banks. The judgment and loss sharing
agreements were designed to apportion financial
responsibilities arising from any potential adverse judgment or
negotiated settlements related to the specified litigation.
In May 2010, Visa funded $500 million to their litigation
escrow account and reduced the conversion ratio of Visa B to
A shares. We consequently recognized our estimated $47
million share of the $500 million as a reduction of our
previously established indemnification liability and a
reduction of noninterest expense.
In October 2010, Visa funded $800 million to their litigation
escrow account and reduced the conversion ratio of Visa B to
A shares. We consequently recognized our estimated $76
million share of the $800 million as a reduction of our
previously established indemnification liability and a
reduction of noninterest expense.
Our Visa indemnification liability included on our
Consolidated Balance Sheet at December 31, 2010 totaled
180