SunTrust 2011 Annual Report Download - page 22
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There are limits and restrictions on transactions in which SunTrust Bank and its subsidiaries may engage with the Company and
other Company subsidiaries. Sections 23A and 23B of the Federal Reserve Act and the Federal Reserves' Regulation W, among
other things, govern the terms and conditions and limit the amount of extensions of credit by SunTrust Bank and its subsidiaries
to the Company and other Company subsidiaries, purchases of assets by SunTrust Bank and its subsidiaries from the Company
and other Company subsidiaries, and the amount of collateral required to secure extensions of credit by SunTrust Bank and its
subsidiaries to the Company and other Company subsidiaries. The Dodd-Frank Act significantly enhanced and expanded the scope
and coverage of the limitations imposed by Sections 23A and 23B, in particular, by including within its scope derivative transactions
by and between SunTrust Bank or its subsidiaries and the Company or other Company subsidiaries. The Federal Reserve enforces
the terms of 23A and 23B and audits the enterprise for compliance.
In October 2011, the Federal Reserve and other regulators jointly issued a proposed rule implementing requirements of a new
Section 13 to the BHC Act, commonly referred to as the “Volcker Rule.” The proposed rule generally prohibits the Company and
its subsidiaries from (i) engaging in proprietary trading for its own account, (ii) acquiring or retaining an ownership interest in or
sponsoring a “covered fund,” and (iii) entering into certain relationships with a “covered fund,” all subject to certain exceptions.
The proposed rule also clarifies certain activities in which the Company and its subsidiaries may continue to engage. The proposed
rule, when finalized, is likely to further restrict and limit the types of activities in which the Company and its subsidiaries may
engage. Moreover, the proposed rule, when finalized, is likely to require the Company and its subsidiaries to adopt complex
compliance monitoring systems in order to assure compliance with the final rule while engaging in activities that the Company
and its subsidiaries currently conduct.
The Patriot Act substantially broadened existing anti-money laundering legislation and the extraterritorial jurisdiction of the U.S.;
imposes compliance and due diligence obligations; creates crimes and penalties; compels the production of documents located
both inside and outside the U.S., including those of non-U.S. institutions that have a correspondent relationship in the U.S.; and
clarifies the safe harbor from civil liability to clients. The U.S. Treasury has issued a number of regulations that further clarify the
Patriot Act's requirements or provide more specific guidance on their application. The Patriot Act requires all “financial institutions,”
as defined, to establish certain anti-money laundering compliance and due diligence programs. The Patriot Act requires financial
institutions that maintain correspondent accounts for non-U.S. institutions, or persons that are involved in private banking for
“non-U.S. persons” or their representatives, to establish, “appropriate, specific and, where necessary, enhanced due diligence
policies, procedures, and controls that are reasonably designed to detect and report instances of money laundering through those
accounts.” Bank regulators are focusing their examinations on anti-money laundering compliance, and we continue to enhance
our anti-money laundering compliance programs.
During the fourth quarter of 2011, the Federal Reserve's final rules related to debit card interchange fees became effective. These
rules significantly limit the amount of interchange fee income that we may charge for electronic debit transactions. Similarly, in
2009, the Federal Reserve adopted amendments to its Regulation E that restrict our ability to charge our clients overdraft fees for
ATM and everyday debit card transactions. Pursuant to the adopted regulation, clients must opt-in to an overdraft service in order
for banks to collect overdraft fees. Overdraft fees have in the past represented a significant amount of noninterest fees collected
by the Company's banking subsidiary.
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, bank holding companies from any state
may acquire banks located in any other state, subject to certain conditions, including concentration limits. In addition, a bank may
establish branches across state lines by merging with a bank in another state and, as amended by the Dodd-Frank Act, subject to
few restrictions. A bank holding company may not directly or indirectly acquire ownership or control of more than 5% of the
voting shares or substantially all of the assets of any bank or merge or consolidate with another bank holding company without
the prior approval of the Federal Reserve. Under the recently enacted Dodd-Frank Act, a bank holding company may not acquire
another bank or engage in new activities that are financial in nature or acquire a non-bank company that engages in activities that
are financial in nature unless the bank holding company is both well capitalized and deemed by the Federal Reserve to be well
managed. Moreover, a bank and its affiliates may not, after the acquisition of another bank, control more than 10% of the amount
of deposits of insured depository institutions in the U.S. and a financial company may not merge, consolidate or acquire another
company if the total consolidated liabilities of the acquiring financial company after such acquisition exceeds 10% of the aggregated
consolidated liabilities of all financial companies at the end of the year preceding the transaction. In addition, certain states may
have limitations on the amount of deposits any bank may hold within that state.
On July 21, 2010, the Federal Reserve and other regulators jointly published final guidance for structuring incentive compensation
arrangements at financial organizations, which guidelines are applicable to all financial institutions. The guidance does not set
forth any formulas or pay caps for, but contains certain principles which companies would be required to follow with respect to,
employees and groups of employees that may expose the company to material amounts of risk. The three primary principles are
(i) balanced risk-taking incentives, (ii) compatibility with effective controls and risk management, and (iii) strong corporate
governance. The Federal Reserve will now monitor compliance with this guidance as part of its safety and soundness oversight.