PNC Bank 2010 Annual Report Download - page 20
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Please find page 20 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.Reflecting concern about the stability of the financial markets
generally and the strength of counterparties, as well as
concern about their own capital and liquidity positions, many
lenders and institutional investors reduced or ceased providing
funding to borrowers. The resulting economic pressure on
consumers and businesses and the lack of confidence in the
financial markets exacerbated the state of economic distress
and hampered, and to some extent continues to hamper, efforts
to bring about and sustain an economic recovery.
These economic conditions have had an adverse effect on our
business and financial performance. While the economy is
currently experiencing a moderate recovery, we expect these
conditions to continue to have an ongoing negative impact on
us. A slowing or failure of the economic recovery would
likely aggravate the adverse effects of these difficult economic
and market conditions on us and on others in the financial
services industry.
In particular, we may face the following risks in connection
with the current economic and market environment:
• Investors may have less confidence in the equity
markets in general and in financial services industry
stocks in particular, which could place downward
pressure on PNC’s stock price and resulting market
valuation.
• Economic and market developments may further
affect consumer and business confidence levels and
may cause declines in credit usage and adverse
changes in payment patterns, causing increases in
delinquencies and default rates.
• Our ability to assess the creditworthiness of our
customers may be impaired if the models and
approaches we use to select, manage, and underwrite
our customers become less predictive of future
behaviors.
• The process we use to estimate losses in our credit
exposures requires difficult, subjective, and complex
judgments, including with respect to economic
conditions and how economic conditions might
impair the ability of our borrowers to repay their
loans. At any point in time or for any length of time,
such losses may no longer be capable of accurate
estimation, which may, in turn, adversely impact the
reliability of the process for estimating losses and,
therefore, the establishment of adequate reserves for
those losses.
• We could suffer decreases in customer desire to do
business with us, whether as a result of a decreased
demand for loans or other financial products and
services or decreased deposits or other investments in
accounts with PNC.
• Competition in our industry could intensify as a
result of the increasing consolidation of financial
services companies in connection with current market
conditions, or otherwise. Governmental support
provided to financial institutions could alter the
competitive landscape.
• Increased regulation of compensation at financial
services companies as part of government efforts to
reform the industry may hinder our ability to attract,
retain and incentivize well-qualified individuals in
key positions.
• We may be required to pay significantly higher FDIC
deposit insurance premiums because the failure of
many depository institutions during the financial
crises significantly depleted the insurance fund of the
FDIC and reduced the ratio of reserves to insured
deposits, leading to regulatory reform efforts aimed
at charging higher premiums in order to replenish
FDIC reserves.
• Investors in mortgage loans and other assets that we
sell are more likely to seek indemnification from us
against losses or otherwise seek to have us share in
such losses or to request us to repurchase loans that
they believe do not comply with applicable
representations and warranties or other contractual
provisions.
• We may be subject to additional fees and taxes as the
government seeks to recover some of the costs of its
recovery efforts, in particular from the financial
services industry.
The regulatory environment for the financial services
industry is being significantly impacted by financial
regulatory reform initiatives in the United States and
elsewhere, including Dodd-Frank and regulations
promulgated to implement it.
The United States and other governments have undertaken
major reform of the financial services industry, including new
efforts to protect consumers and investors from financial
abuse. We expect to face further increased regulation of our
industry as a result of current and future initiatives intended to
provide economic stimulus, financial market stability and
enhanced regulation of financial services companies and to
enhance the liquidity and solvency of financial institutions and
markets. We also expect in many cases more aggressive
enforcement of regulations on both the federal and state
levels. Compliance with regulations will increase our costs,
reduce our revenue, and limit our ability to pursue certain
business opportunities.
Dodd-Frank mandates the most wide-ranging overhaul of
financial industry regulation in decades. Dodd-Frank was
signed into law on July 21, 2010. Many parts of the law are
now in effect and others are now in the implementation stage,
which is likely to continue for several years. The law requires
that regulators, some of which are new regulatory bodies
created by Dodd-Frank, draft, review and approve more than
200 implementing regulations and conduct numerous studies
that are likely to lead to more regulations.
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