SunTrust 2011 Annual Report Download - page 25
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Legislation and regulation, including the Dodd-Frank Act, as well as future legislation and/or regulation, could require us
to change certain of our business practices, reduce our revenue, impose additional costs on us or otherwise adversely affect
our business operations and/or competitive position.
We are subject to significant regulation under state and federal laws in the U.S. Economic, financial, market, and political conditions
during the past few years have led to significant new legislation and regulation in the U.S. and in other jurisdictions outside of the
U.S. where we conduct business. These laws and regulations may affect the manner in which we do business and the products and
services that we provide, affect or restrict our ability to compete in our current businesses or our ability to enter into or acquire
new businesses, reduce or limit our revenue in businesses or impose additional fees, assessments or taxes on us, intensify the
regulatory supervision of us and the financial services industry, and adversely affect our business operations or have other negative
consequences.
For example, in 2009 several legislative and regulatory initiatives were adopted that will have an impact on our businesses and
financial results, including FRB amendments to Regulation E which, among other things, affect the way we may charge overdraft
fees. In third quarter 2009, we also implemented policy changes to help customers limit overdraft and returned item fees. The
impact on our revenue of the Regulation E amendments, as well as our policy changes, reduced our 2010 and 2011 fee revenue.
The continuing impact on our future revenue could vary materially due to a variety of factors, including changes in customer
behavior, economic conditions and other potential offsetting factors.
On July 21, 2010, the Dodd-Frank Act became law. The Dodd-Frank Act, among other things, (i) established a new Financial
Stability Oversight Council to monitor systemic risk posed by financial firms and imposes additional and enhanced FRB regulations,
including capital and liquidity requirements, on certain large, interconnected bank holding companies and systemically significant
nonbanking firms intended to promote financial stability; (ii) created a liquidation framework for the resolution of covered financial
companies, the costs of which would be paid through assessments on surviving covered financial companies; (iii) made significant
changes to the structure of bank and bank holding company regulation and activities in a variety of areas, including prohibiting
proprietary trading and private fund investment activities, subject to certain exceptions; (iv) created a new framework for the
regulation of OTC derivatives and new regulations for the securitization market and strengthens the regulatory oversight of
securities and capital markets by the SEC; (v) established the CFPB within the FRB, which will have sweeping powers to administer
and enforce a new federal regulatory framework of consumer financial regulation; (vi) provided for increased regulation of
residential mortgage activities; (vii) revised the FDIC's assessment base for deposit insurance by changing from an assessment
base defined by deposit liabilities to a risk-based system based on total assets; and (vii) authorized the FRB under the Durbin
Amendment to issue regulations establishing, among other things, standards for assessing whether debit card interchange fees
received by debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit transactions.
Many provisions of the Dodd-Frank Act became effective in July 2010, and additional provisions became effective upon the first
anniversary of its enactment, July 21, 2011. However, a number of these and other provisions of the Dodd-Frank Act still require
extensive rulemaking, guidance, and interpretation by regulatory authorities and have extended implementation periods and delayed
effective dates. Accordingly, in many respects the ultimate impact of the Dodd-Frank Act and its effects on the U.S. financial
system and us will not be known for an extended period of time. Nevertheless, the Dodd-Frank Act, including current and future
rules implementing its provisions and the interpretation of those rules, could result in a loss of revenue, require us to change certain
of our business practices, limit our ability to pursue certain business opportunities, increase our capital requirements and impose
additional assessments and costs on us and otherwise adversely affect our business operations and have other negative consequences.
For example, the FRB recently issued final rules regarding debit card interchange fees which implement the Durbin Amendment
and became effective on October 1, 2011. As a result of the new rules, we currently expect that our quarterly income will be
reduced by approximately $50 million (before tax) before the impact of any offsetting actions. Although we expect to recapture
a portion of this lost income over time through volume and product changes, there can be no assurance that we will be successful
in our efforts to mitigate the negative impact to our financial results from the Durbin Amendment.
The Dodd-Frank Act (through provisions commonly known as the “Volcker Rule”) prohibits banks from engaging in some types
of proprietary trading and restricts the ability of banks to sponsor or invest in private equity or hedge funds. The relevant regulatory
agencies have recently proposed implementing regulations for the Volcker Rule and issued them for public comment. Although
we do not have a designated proprietary trading operation, the scope of the proprietary trading prohibition and its impact on us
will depend on definitions in the final rule, particularly those definitions related to statutory exemptions for market making, hedging
activities and customer trading. Until more is known regarding these definitions and the other provisions of the implementing
rules, we cannot determine the impact of the proprietary trading prohibition, although we expect that any meaningful limitation
on our ability to hedge our risks in the ordinary course or to trade on behalf of customers or conduct related market making activities
would adversely affect our business and results of operations. As of December 31, 2011, we held less than $200 million in interests
in private equity and hedge funds likely to be affected by the Volcker Rule. We expect that over time we may need to eliminate
these investments and may need to cease sponsoring these funds if an applicable exemption is not available. A forced sale of some
of these investments due to the Volcker Rule could result in us receiving less value than we otherwise would have received.