PNC Bank 2011 Annual Report Download - page 57

O FF -B ALANCE S HEET A RRANGEMENTS
A ND V ARIABLE I NTEREST E NTITIES
We engage in a variety of activities that involve
unconsolidated entities or that are otherwise not reflected in
our Consolidated Balance Sheet that are generally referred to
as “off-balance sheet arrangements.” Additional information
on these types of activities is included in the following
sections of this Report:
• Commitments, including contractual obligations and
other commitments, included within the Risk
Management section of this Item 7,
• Note 3 Loan Sale and Servicing Activities and
Variable Interest Entities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report,
• Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report, and
• Note 23 Commitments and Guarantees in the Notes
To Consolidated Financial Statements included in
Item 8 of this Report.
PNC consolidates variable interest entities (VIEs) when we
are deemed to be the primary beneficiary. The primary
beneficiary of a VIE is determined to be the party that meets
both of the following criteria: (1) has the power to make
decisions that most significantly affect the economic
performance of the VIE and (2) has the obligation to absorb
losses or the right to receive benefits that in either case could
potentially be significant to the VIE.
A summary of VIEs, including those that we have
consolidated and those in which we hold variable interests but
have not consolidated into our financial statements, as of
December 31, 2011 and December 31, 2010 is included in
Note 3 in the Notes To Consolidated Financial Statements
included in Item 8 of this Report.
Trust Preferred Securities
In connection with the $950 million in principal amount of
junior subordinated debentures associated with the trust
preferred securities issued by PNC Capital Trusts C, D and E,
as well as in connection with the obligations that remain
outstanding assumed by PNC with respect to $1.7 billion in
principal amount of junior subordinated debentures issued by
acquired entities in association with trust preferred securities
issued by various subsidiary statutory trusts, we are subject to
certain restrictions, including restrictions on dividend
payments. Generally, if there is (i) an event of default under
the debentures, (ii) PNC elects to defer interest on the
debentures, (iii) PNC exercises its right to defer payments on
the related trust preferred securities issued by the statutory
trusts, or (iv) there is a default under PNC’s guarantee of such
payment obligations, as specified in the applicable governing
documents, then PNC would be subject during the period of
such default or deferral to restrictions on dividends and other
provisions protecting the status of the debenture holders
similar to or in some ways more restrictive than those
potentially imposed under the Exchange Agreements with
Trust II and Trust III, as described in Note 13 Capital
Securities of Subsidiary Trusts and Perpetual Trust Securities
in the Notes To Consolidated Financial Statements in Item 8
of this Report.
Also, in connection with the Trust E Securities sale, we are
subject to a replacement capital covenant, which is described
in Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
48 The PNC Financial Services Group, Inc. – Form 10-K