PNC Bank 2011 Annual Report Download - page 19

regulations thereunder. An investment advisor to registered
investment companies is also subject to the requirements of
the Investment Company Act of 1940, as amended, and the
regulations thereunder.
Our broker-dealer and investment advisory subsidiaries also
may be subject to state securities laws and regulations. Over
the past several years, the SEC and other governmental
agencies have been focused on the mutual fund, hedge fund
and broker-dealer industries. Congress and the SEC have
adopted regulatory reforms and are continuing additional
reforms that have increased, and are likely to continue to
increase, the extent of regulation of the mutual fund, hedge
fund and broker-dealer industries and impose additional
compliance obligations and costs on our subsidiaries involved
with those industries.
Under provisions of the federal securities laws applicable to
broker-dealers, investment advisers and registered investment
companies and their service providers, a determination by a
court or regulatory agency that certain violations have
occurred at a company or its affiliates can result in fines,
restitution, a limitation on permitted activities, disqualification
to continue to conduct certain activities and an inability to rely
on certain favorable exemptions. Certain types of infractions
and violations can also affect a public company in its timing
and ability to expeditiously issue new securities into the
capital markets. In addition, certain changes in the activities of
a broker-dealer require approval from FINRA, and FINRA
takes into account a variety of considerations in acting upon
applications for such approval, including internal controls,
capital levels, management experience and quality, prior
enforcement and disciplinary history and supervisory
concerns.
BlackRock has subsidiaries in securities and related
businesses subject to SEC and FINRA regulation, as described
above, and a federally chartered nondepository trust company
subsidiary subject to supervision and regulation by the OCC.
For additional information about the regulation of BlackRock,
we refer you to the discussion under the “Regulation” section
of Item 1 Business in BlackRock’s most recent Annual Report
on Form 10-K, which may be obtained electronically at the
SEC’s website at www.sec.gov.
In addition, Title VII of Dodd-Frank subjects virtually all
derivative transactions (swaps) to regulation by either the
CFTC (in the case of non security-based swaps) or the SEC
(in the case of security-based swaps). This legislation was
enacted, among other reasons, to reduce systemic risk,
increase transparency, and promote market integrity within the
financial system by, among other things: (i) providing for the
registration and comprehensive regulation of swap dealers
(SDs) and major swap participants (MSPs); (ii) imposing
mandatory clearing and trade execution requirements on all
standardized swaps, with certain limited exemptions;
(iii) creating robust recordkeeping and real-time public data
reporting regimes with respect to swaps; (iv) imposing capital
and margin requirements on SDs and MSPs; (v) imposing
business conduct requirements on SDs and MSPs in their
dealings with counterparties; and (vi) enhancing the CFTC’s
and SEC’s rulemaking and enforcement authorities with
respect to SDs and MSPs. Under the rules anticipated under
Dodd-Frank, we expect one or more of our subsidiaries to
register with the CFTC as a SD for interest rate and foreign
exchange swaps and accordingly be subject to all of the new
regulations and requirements imposed on a SD with respect to
these types of swaps.
C OMPETITION
We are subject to intense competition from various financial
institutions and from non-bank entities that can offer a number
of similar products and services without being subject to bank
regulatory supervision and restrictions.
In making loans, PNC Bank, N.A. competes with traditional
banking institutions as well as consumer finance companies,
leasing companies and other non-bank lenders, and
institutional investors including collateralized loan obligation
(CLO) managers, hedge funds, mutual fund complexes and
private equity firms. Loan pricing, structure and credit
standards are extremely important in the current environment
as we seek to achieve appropriate risk-adjusted returns.
Traditional deposit-taking activities are also subject to pricing
pressures and to customer migration as a result of intense
competition for consumer investment dollars.
PNC Bank, N.A. competes for deposits with:
• Other commercial banks,
• Savings banks,
• Savings and loan associations,
• Credit unions,
• Treasury management service companies,
• Insurance companies, and
• Issuers of commercial paper and other securities,
including mutual funds.
Our various non-bank businesses engaged in investment
banking and alternative investment activities compete with:
• Commercial banks,
• Investment banking firms,
• Merchant banks,
• Insurance companies,
• Private equity firms, and
• Other investment vehicles.
In providing asset management services, our businesses
compete with:
• Investment management firms,
• Large banks and other financial institutions,
• Brokerage firms,
• Mutual fund complexes, and
• Insurance companies.
10 The PNC Financial Services Group, Inc. – Form 10-K