PNC Bank 2010 Annual Report Download - page 25
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Please find page 25 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.our business. This impact could include rules and regulations
that affect the nature and profitability of our business
activities, how we use our capital, how we compensate and
incent our employees, and other matters potentially having a
negative effect on our overall business results and prospects.
Under the regulations of the Federal Reserve, a bank holding
company is expected to act as a source of financial strength
for its subsidiary banks. As a result, the Federal Reserve could
require PNC to commit resources to PNC Bank, N.A. when
doing so is not otherwise in the interests of PNC or its
shareholders or creditors.
Our ability to pay dividends to shareholders is largely
dependent on dividends from our operating subsidiaries,
principally PNC Bank, N.A. Banks are subject to regulation
on the amount and circumstances of dividends they can pay to
their holding companies.
We discuss these and other regulatory issues applicable to
PNC, including some particular areas of current regulatory
focus or concern, in the Supervision and Regulation section
included in Item 1 of this Report and in Note 21 Regulatory
Matters in the Notes to Consolidated Financial Statements in
Item 8 of this Report and here by reference.
A failure to have adequate policies and procedures to comply
with regulatory requirements could expose us to damages,
fines and regulatory penalties and other regulatory actions,
which could be significant, and could also injure our
reputation with customers and others with whom we do
business.
We must comply with generally accepted accounting
principles established by the Financial Accounting Standards
Board, accounting, disclosure and other rules set forth by the
SEC, income tax and other regulations established by the US
Treasury and state and local taxing authorities, and revenue
rulings and other guidance issued by the Internal Revenue
Service, which affect our financial condition and results of
operations.
Changes in accounting standards, or interpretations of those
standards, can impact our revenue recognition and expense
policies and affect our estimation methods used to prepare the
consolidated financial statements. Changes in income tax
regulations, revenue rulings, revenue procedures, and other
guidance can impact our tax liability and alter the timing of
cash flows associated with tax deductions and payments. New
guidance often dictates how changes to standards and
regulations are to be presented in our consolidated financial
statements, as either an adjustment to beginning retained
earnings for the period or as income or expense in current
period earnings. In some cases, changes may be applied to
previously reported disclosures.
The determination of the amount of loss allowances and
impairments taken on our assets is highly subjective and
inaccurate estimates could materially impact our results of
operations or financial position.
The determination of the amount of loss allowances and asset
impairments varies by asset type and is based upon our
periodic evaluation and assessment of known and inherent
risks associated with the respective asset class. Such
evaluations and assessments are revised as conditions change
and new information becomes available. Management updates
its evaluations regularly and reflects changes in allowances
and impairments in operations as such evaluations are revised.
There can be no assurance that our management has
accurately assessed the level of impairments taken and
allowances reflected in our financial statements. Furthermore,
additional impairments may need to be taken or allowances
provided for in the future. Historical trends may not be
indicative of future impairments or allowances.
Our asset valuation may include methodologies,
estimations and assumptions that are subject to differing
interpretations and this, along with market factors such as
volatility in one or more markets, could result in changes
to asset valuations that may materially adversely affect
our results of operations or financial condition.
We must use estimates, assumptions, and judgments when
assets and liabilities are measured and reported at fair value.
Assets and liabilities carried at fair value inherently result in a
higher degree of financial statement volatility. Fair values and
the information used to record valuation adjustments for
certain assets and liabilities are based on quoted market prices
and/or other observable inputs provided by independent third-
party sources, when available. When such third-party
information is not available, we estimate fair value primarily
by using cash flow and other financial modeling techniques
utilizing assumptions such as credit quality, liquidity, interest
rates and other relevant inputs. Changes in underlying factors
or assumptions in any of the areas underlying our estimates
could materially impact our future financial condition and
results of operations.
During periods of market disruption, including periods of
significantly rising or high interest rates, rapidly widening
credit spreads or illiquidity, it may be more difficult to value
certain of our assets if trading becomes less frequent and/or
market data becomes less observable. There may be certain
asset classes that were historically in active markets with
significant observable data that rapidly become illiquid due to
market volatility, a loss in market confidence or other factors.
In such cases, valuations in certain asset classes may require
more subjectivity and management judgment; valuations may
include inputs and assumptions that are less observable or
require greater estimation. Further, rapidly changing and
unprecedented market conditions in any particular market
(e.g. credit, equity, fixed income, foreign exchange) could
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