PNC Bank 2010 Annual Report Download - page 21
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Please find page 21 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.Newly created regulatory bodies include the CFPB and the
FSOC. The CFPB has been given authority to regulate
consumer financial products and services sold by banks and
non-bank companies and to supervise banks with assets of
more than $25 billion for compliance with Federal
consumer protection laws. The FSOC has been charged with
identifying systemic risks and strengthening the regulation of
financial holding companies and certain non-bank companies
deemed to be “systemically important” and could, in
extraordinary cases, break up financial firms that are deemed
to be “too big to fail.”
A number of reform provisions are likely to significantly
impact the ways in which banks and bank holding companies,
including PNC, do business. For example, Dodd-Frank
prohibits banks from engaging in some types of proprietary
trading, restricts the ability of banks to sponsor or invest in
private equity or hedge funds, and requires banks to move
some derivatives businesses to separately capitalized
subsidiaries of holding companies. It also places limitations on
the interchange fees we can charge for debit transactions.
While the exact impact of the preemption provisions of Dodd-
Frank is as yet unknown, state authorities may assert that
certain state consumer financial laws that provide different
requirements or limitations than Federal law may apply to
national banks, including PNC Bank, N.A. Such state laws
may be preempted if they meet certain standards set forth in
Dodd-Frank. Other provisions of Dodd-Frank will affect
regulatory oversight, holding company capital requirements,
risk retention for securitizations, and residential mortgage
products.
In addition, capital requirements imposed by Dodd-Frank,
together with new standards under the so-called “Basel III”
initiatives, will impose on banks and bank holding companies
the need to maintain more and higher quality capital than has
historically been the case.
While much of how the Dodd-Frank and other financial
industry reforms will change our current business operations
depends on the specific regulatory promulgations and
interpretations, many of which have yet to be released or
finalized, it is clear that the reforms, both under Dodd-Frank
and otherwise, will have a significant effect on our entire
industry. Although Dodd-Frank and other reforms will affect a
number of the areas in which we do business, it is not clear at
this time the full extent of the adjustments that will be
required and the extent to which we will be able to adjust our
businesses in response to the requirements. Although it is
difficult to predict the magnitude and extent of these effects at
this stage, we believe compliance with Dodd-Frank and its
implementing regulations and other initiatives will negatively
impact revenue and increase the cost of doing business, both
in terms of transition expenses and on an ongoing basis, and
will also limit our ability to pursue certain business
opportunities.
Our lending businesses and the value of the loans and debt
securities we hold may be adversely affected by economic
conditions, including a reversal or slowing of the current
moderate recovery. Downward valuation of debt securities
could also negatively impact our capital position.
Given the high percentage of our assets represented directly or
indirectly by loans, and the importance of lending to our
overall business, weak economic conditions are likely to have
a negative impact on our business and our results of
operations. This could adversely impact loan utilization rates
as well as delinquencies, defaults and customer ability to meet
obligations under the loans. This is particularly the case
during the period in which the aftermath of recessionary
conditions continues and the positive effects of economic
recovery appear to be slow to materialize and unevenly spread
among our customers.
Further, weak economic conditions would likely have a
negative impact on our business, our ability to serve our
customers, and our results of operations. Such conditions are
likely to lead to increases in the number of borrowers who
become delinquent or default or otherwise demonstrate a
decreased ability to meet their obligations under their loans.
This would result in higher levels of non-performing loans,
net charge-offs, provision for credit losses and valuation
adjustments on loans held for sale. The value to us of other
assets such as investment securities, most of which are debt
securities or other financial instruments supported by loans,
similarly would be negatively impacted by widespread
decreases in credit quality resulting from a weakening of the
economy.
Our regional concentrations make us particularly at risk
to adverse economic conditions in our primary retail
banking footprint.
Although many of our businesses are national in scope, our
retail banking business is concentrated within our retail branch
network footprint, located primarily in Pennsylvania, Ohio,
New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky,
Florida, Virginia, Missouri, Delaware, Washington, D.C., and
Wisconsin. Thus, we are particularly vulnerable to adverse
changes in economic conditions in these states or the
Mid-Atlantic and Midwest regions more generally.
Our business and performance are vulnerable to the
impact of volatility in debt and equity markets.
As most of our assets and liabilities are financial in nature, we
tend to be particularly sensitive to the performance of the
financial markets. Turmoil and volatility in U.S. and global
financial markets, such as that experienced during the recent
financial crisis, can be a major contributory factor to overall
weak economic conditions, leading to some of the risks
discussed above, including the impaired ability of borrowers
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