PNC Bank 2011 Annual Report Download - page 18

appoint a receiver for the institution. Business activities may
also be influenced by an institution’s capital classification. For
instance, only a “well capitalized” depository institution may
accept brokered deposits without prior regulatory approval
and an “adequately capitalized” depository institution may
accept brokered deposits only with prior regulatory approval.
At December 31, 2011, PNC Bank, N.A. exceeded the
required ratios for classification as “well capitalized.” For
additional discussion of capital adequacy requirements, we
refer you to “Funding and Capital Sources” in the
Consolidated Balance Sheet Review section of Item 7 of this
Report and to Note 21 Regulatory Matters in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
Laws and regulations limit the scope of our permitted
activities and investments. In addition to the activities that
would be permitted to be conducted by a financial subsidiary,
national banks (such as PNC Bank, N.A.) and their operating
subsidiaries may engage in any activities that are determined
by the OCC to be part of or incidental to the business of
banking.
Moreover, examination ratings of “3” or lower, lower capital
ratios than peer group institutions, regulatory concerns
regarding management, controls, assets, operations or other
factors, can all potentially result in practical limitations on the
ability of a bank or bank holding company to engage in new
activities, grow, acquire new businesses, repurchase its stock
or pay dividends, or to continue to conduct existing activities.
The Federal Reserve’s prior approval is required whenever we
propose to acquire all or substantially all of the assets of any
bank or thrift, to acquire direct or indirect ownership or
control of more than 5% of any class of voting shares of any
bank or thrift, or to merge or consolidate with any other bank
holding company or thrift holding company. The BHC Act
enumerates the factors the Federal Reserve Board must
consider when reviewing the merger of bank holding
companies or the acquisition of banks. These factors include
the competitive effects of the proposal in the relevant
geographic markets; the financial and managerial resources
and future prospects of the companies and banks involved in
the transaction; the effect of the transaction on financial
stability; the organizations’ compliance with anti-money
laundering laws and regulations; the convenience and needs of
the communities to be served; and the records of performance
under the CRA of the insured depository institutions involved
in the transaction. In cases involving interstate bank
acquisitions, the Board also must consider the concentration of
deposits nationwide and in certain individual states. OCC
prior approval is required for PNC Bank, N.A. to acquire
another insured bank or thrift by merger. In deciding whether
to approve such a transaction, the OCC is required to consider
factors similar to those that must be considered by the Federal
Reserve. Our ability to grow through acquisitions could be
limited by these approval requirements.
At December 31, 2011, PNC Bank, N.A. was rated
“Outstanding” with respect to CRA.
FDIC Insurance. PNC Bank, N.A. is insured by the FDIC and
subject to premium assessments. Regulatory matters could
increase the cost of FDIC deposit insurance premiums to an
insured bank as FDIC deposit insurance premiums are “risk
based.” Therefore, higher fee percentages would be charged to
banks that have lower capital ratios or higher risk profiles.
These risk profiles take into account weaknesses that are
found by the primary banking regulator through its
examination and supervision of the bank. A negative
evaluation by the FDIC or a bank’s primary federal banking
regulator could increase the costs to a bank and result in an
aggregate cost of deposit funds higher than that of competing
banks in a lower risk category. Under Dodd-Frank, in April
2011, the deposit insurance base calculation shifted from
deposits to average assets less Tier 1 capital. This
methodology change did not materially impact the premiums
due to the FDIC.
CFPB Regulation and Supervision.The Dodd-Frank Act gives
the CFPB authority to examine PNC and PNC Bank, N.A. for
compliance with a broad range of federal consumer financial
laws and regulations, including the laws and regulations that
relate to credit card, deposit, mortgage and other consumer
financial products and services we offer. In addition, Dodd-
Frank gives the CFPB broad authority to take corrective action
against PNC Bank, N.A. and PNC as it deems appropriate.
The CFPB also has powers that it was assigned in Dodd-Frank
to issue regulations and take enforcement actions to prevent
and remedy acts and practices relating to consumer financial
products and services that it deems to be unfair, deceptive or
abusive. The agency also has authority to impose new
disclosure requirements for any consumer financial product or
service. These authorities are in addition to the authority the
CFPB assumed on July 21, 2011 under existing consumer
financial law governing the provision of consumer financial
products and services.
S ECURITIES AND D ERIVATIVES R EGULATION
The SEC is the functional regulator of our registered broker-
dealer and investment advisor subsidiaries. The registered
broker-dealer subsidiaries are also subject to rules and
regulations promulgated by the Financial Industry Regulatory
Authority (FINRA), among others.
Several of our subsidiaries are registered with the SEC as
investment advisers and provide services to clients, other PNC
affiliates and related entities, including registered investment
companies. Under rules adopted under Dodd-Frank, we have
been required to register additional subsidiaries as investment
advisors to private equity funds. Broker-dealer subsidiaries are
subject to the requirements of the Securities Exchange Act of
1934, as amended, and the regulations thereunder. Investment
advisor subsidiaries are subject to the requirements of the
Investment Advisers Act of 1940, as amended, and the
The PNC Financial Services Group, Inc. – Form 10-K 9