PNC Bank 2010 Annual Report Download - page 34
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Please find page 34 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.for PNC. It includes provisions that could increase regulatory
fees and deposit insurance assessments and impose heightened
capital and prudential standards, while at the same time
impacting the nature and costs of PNC’s businesses, including
consumer lending, private equity investment, derivatives
transactions, interchange fees on debit card transactions, and
asset securitizations.
Until such time as the regulatory agencies issue final
regulations implementing all of the numerous provisions of
Dodd-Frank, a process that will extend at least over the next
year and might last several years, PNC will not be able to fully
assess the impact the legislation will have on its businesses.
However, we believe that the expected changes will be
manageable for PNC and will have a smaller impact on us
than on our larger peers.
Included in these recent legislative and regulatory
developments are evolving regulatory capital standards for
financial institutions. Dodd-Frank requires the Federal
Reserve Board to establish capital requirements that would,
among other things, eliminate the Tier 1 treatment of trust
preferred securities following a phase-in period expected to
begin in 2013. Evolving standards also include the so-called
“Basel III” initiatives that are part of the Basel II effort by
international banking supervisors to update the original
international bank capital accord (Basel I), which has been in
effect since 1988. The recent Basel III capital initiative, which
has the support of US banking regulators, includes heightened
capital requirements for major banking institutions in terms of
both higher quality capital and higher regulatory capital ratios.
Basel III capital standards will require implementing
regulations by the banking regulators. These regulations will
become effective under a phase-in period beginning January 1,
2013, and will become fully effective January 1, 2019.
Dodd-Frank also establishes, as an independent agency that is
organized as a bureau within the Federal Reserve, the Bureau
of Consumer Financial Protection (CFPB). Starting July 21,
2011, the CFPB will have the authority to prescribe rules
governing the provision of consumer financial products and
services, and it is expected that the CFPB will issue new
regulations, and amend existing regulations, regarding
consumer protection practices. Also on that date, the authority
of the OCC to examine PNC Bank, N.A. for compliance with
consumer protection laws, and to enforce such laws, will
transfer to CFPB.
Additionally, new provisions concerning the applicability of
state consumer protection laws will become effective on
July 21, 2011. Questions may arise as to whether certain state
consumer financial laws that may have previously been
preempted are no longer preempted after this date. Depending
on how such questions are resolved, we may experience an
increase in regulation of our retail banking business and
additional compliance obligations, revenue impacts, and costs.
Dodd-Frank and its implementation, as well as other statutory
and regulatory initiatives that will be ongoing, will introduce
numerous regulatory changes over the next several years.
While we believe that we are well positioned to navigate
through this process, we cannot predict the ultimate impact of
these actions on PNC’s business plans and strategies.
R
ESIDENTIAL
M
ORTGAGE
F
ORECLOSURE
M
ATTERS
Beginning in the third quarter of 2010, mortgage foreclosure
documentation practices among US financial institutions
received heightened attention by regulators and the media.
PNC’s US market share for residential servicing is less than
2%. The vast majority of our servicing business is on behalf of
other investors, principally the Federal Home Loan Mortgage
Corporation (FHLMC) and the Federal National Mortgage
Association (FNMA). Following the initial reports regarding
these practices, we conducted an internal review of our
foreclosure procedures. Based upon our review, we believe
that PNC has systems designed to ensure that no foreclosure
proceeds unless the loan is genuinely in default. On average,
our residential mortgage loans are delinquent approximately
six months before foreclosure proceedings are initiated.
Similar to other banks, however, we identified issues
regarding some of our foreclosure practices. Accordingly, we
delayed pursuing individual foreclosures and are moving
forward on such matters only when we are confident that any
pending documentation issues had been resolved. We are also
proceeding with new foreclosures under enhanced procedures
designed as part of this review to minimize the risk of errors
related to the processing of documentation in foreclosure
cases.
In addition, the Federal Reserve and the OCC, together with
the FDIC and others, commenced a publicly-disclosed
interagency horizontal review of residential mortgage
servicing operations at PNC and thirteen other federally
regulated mortgage servicers. That review is expected to result
in formal enforcement actions against many or all of the
companies subject to review, which actions are expected to
incorporate remedial requirements, heightened mortgage
servicing standards and potential civil money penalties. In
particular, PNC expects that it will enter into a consent order
with the Federal Reserve and that PNC Bank will enter into a
consent order with the OCC. PNC anticipates that the consent
orders will require, among other things, that PNC undertake
certain actions described below. PNC expects that the orders
will discuss certain purported deficiencies regarding, among
other things, the manner in which PNC Bank handled various
loan servicing activities relating to residential mortgage
foreclosures, the resources and controls for, and risk
management of, such servicing activities and oversight of
certain third-party providers. PNC further expects that the
orders will require commitments regarding a range of
remedial actions, some of which we will already have
undertaken as a result of our recent review of residential
mortgage servicing procedures.
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