SunTrust 2011 Annual Report Download - page 21
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the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority
in payment ahead of unsecured, nondeposit creditors, including the parent bank holding company, with respect to any extensions
of credit they have made to such insured depository institution.
The FDIC insures interest-bearing deposits accounts up to $250,000 and, until December 31, 2012, insures non-interest bearing
deposit accounts on an unlimited basis. It provides this insurance through the DIF, which the FDIC maintains by assessing depository
institutions an insurance premium. The amount each institution was assessed prior to April 1, 2011 was based upon statutory
factors that include the average balance of insured deposits as well as the degree of risk the institution poses to the insurance fund.
Pursuant to the Dodd-Frank Act, the FDIC changed how it assesses insurance premiums. Beginning April 1, 2011, the FDIC began
assessing deposit insurance premiums on the basis of a depository institution's average consolidated net assets and not its deposits.
Additionally, the FDIC introduced changes to the method by which it determines each depository institution's insurance premium
rate to include a variety of factors that translate into a complex scorecard. Not all of the factors that are used to compute the final
assessment have been finalized or fully implemented, including the definitions of “subprime loan” and “leveraged loan;” however,
we anticipate that regulators will clarify these definitions in 2012 and that the FDIC will fully implement them. These changes
were in addition to previous changes related to pre-funding insurance premiums. In late 2009, the FDIC required insured institutions
to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. An
insured institution's quarterly risk-based deposit insurance assessment will continue to be calculated on a quarterly basis, but will
be paid from the amount the institution prepaid until the later of the date that amount is exhausted or June 30, 2013, at which point
any remaining funds would be returned to the insured institution. Consequently, the Company's prepayment of DIF premiums
made on December 29, 2009 resulted in a prepaid asset of $925 million at that time, and after amortization, is currently at $406
million at December 31, 2011.
FDIC regulations require that management report annually on its responsibility for preparing its institution's financial statements,
establishing and maintaining an internal control structure and procedures for financial reporting, and compliance with designated
laws and regulations concerning safety and soundness.
The Dodd-Frank Act created the CFPB, which is separated into five units: Research, Community Affairs, Complaint Tracking and
Collection, Office of Fair Lending and Equal Opportunity, and Office of Financial Literacy. The CFPB has broad power to adopt
new regulations to protect consumers, which power it may exercise at its discretion and so long as it advances the general concept
of the protection of consumers. In particular, such regulations may further restrict the Company's banking subsidiary from collecting
overdraft fees or limit the amount of overdraft fees that may be collected by the Company's banking subsidiary beyond the limits
imposed by the 2009 amendments to Regulation E discussed below.
The BHC Act limits the activities permissible in which bank holding companies and its subsidiaries may engage. On November 12,
1999, financial modernization legislation known as the GLB Act was signed into law. Under the GLB Act, a bank holding company
which elects to become a financial holding company may engage in expanded securities activities, insurance sales, underwriting
activities, and other financial activities, and may also acquire securities firms and insurance companies, subject in each case to
certain conditions. The Company has elected to become a financial holding company under the GLB Act. Nevertheless, the activities
in which the Company may engage remain limited to a range of activities that are (i) financial in nature or incidental to such
financial activity, or (ii) complimentary to a financial activity and which does not pose a risk to the safety and soundness of a
depository institution or the financial system generally. The GLB Act further regulated whether the expanded activities may be
engaged in by the Company's subsidiary bank, a subsidiary of the bank or elsewhere in the enterprise. If any of our banking
subsidiaries ceases to be “well capitalized” or “well managed” under applicable regulatory standards, the Federal Reserve may,
among other things, place limitations on our ability to conduct these broader financial activities or, if the deficiencies persist,
require us to divest the banking subsidiary. In order to become and maintain its status as a financial holding company, the Company
and all of its affiliated depository institutions must be “well-capitalized,” “well-managed,” and have at least a satisfactory CRA
rating. Furthermore, if the Federal Reserve determines that a financial holding company has not maintained a satisfactory CRA
rating, the Company will not be able to commence any new financial activities or acquire a company that engages in such activities,
although the Company will still be allowed to engage in activities closely related to banking and make investments in the ordinary
course of conducting such expanded banking activities.
Federal banking regulators, as required under the GLB Act, have adopted rules limiting the ability of banks and other financial
institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy
policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to
nonaffiliated third parties. The privacy provisions of the GLB Act affect how consumer information is transmitted through
diversified financial services companies and conveyed to outside vendors.