SunTrust 2011 Annual Report Download - page 38
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We are subject to certain litigation, and our expenses related to this litigation may adversely affect our results.
We are from time to time subject to certain litigation in the ordinary course of our business. These claims and legal actions,
including supervisory actions by our regulators, could involve large monetary claims and significant defense costs. The outcome
of these cases is uncertain. However, during the current credit crisis, we have seen both the number of cases and our expenses
related to those cases increase.
We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably
estimated. We may still incur legal costs for a matter even if we have not established a reserve. In addition, the actual cost of
resolving a legal claim may be substantially higher than any amounts reserved for that matter. The ultimate resolution of a pending
legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and
financial condition.
While we do not believe that any single case will have a material adverse effect on us, the cumulative burden of these cases may
adversely affect our results. Substantial legal liability or significant regulatory action against us could have material adverse
financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. We may
be exposed to substantial uninsured liabilities, which could adversely affect our results of operations and financial condition. For
additional information, see Note 20 , “Contingencies,” to the Consolidated Financial Statements in this Form 10-K.
We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or
unintentional violations.
We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations. However, some
legal/regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance
was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure
compliance. For example, we are subject to regulations issued by the OFAC that prohibit financial institutions from participating
in the transfer of property belonging to the governments of certain foreign countries and designated nationals of those countries.
OFAC may impose penalties for inadvertent or unintentional violations even if reasonable processes are in place to prevent the
violations. There may be other negative consequences resulting from a finding of noncompliance, including restrictions on certain
activities. Such a finding may also damage our reputation.
We depend on the expertise of key personnel. If these individuals leave or change their roles without effective replacements,
operations may suffer.
The success of our business has been, and the continuing success will be, dependent to a large degree on the continued services
of executive officers, especially our Chairman and Chief Executive Officer, William H. Rogers, Jr., and other key personnel who
have extensive experience in the industry. We generally do not carry key person life insurance on any of the executive officers or
other key personnel. If we lose the services of any of these integral personnel and fail to manage a smooth transition to new
personnel, the business could be impacted.
We may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase
as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to
implement our business strategies.
Our success depends upon the ability to attract and retain highly motivated, well-qualified personnel. We face significant
competition in the recruitment of qualified employees. Our ability to execute the business strategy and provide high quality service
may suffer if we are unable to recruit or retain a sufficient number of qualified employees or if the costs of employee compensation
or benefits increase substantially. Further, in June, 2010, the Federal Reserve, the OCC, the Office of Thrift Supervision, and the
FDIC jointly issued comprehensive final guidance designed to ensure that incentive compensation policies do not undermine the
safety and soundness of banking organizations by encouraging employees to take imprudent risks. This regulation significantly
restricts the amount, form, and context in which we pay incentive compensation.
Our accounting policies and processes are critical to how we report our financial condition and results of operations. They
require management to make estimates about matters that are uncertain.
Accounting policies and processes are fundamental to how we record and report the financial condition and results of operations.
Some of these policies require use of estimates and assumptions that may affect the value of our assets or liabilities and financial
results. Several of our accounting policies are critical because they require management to make difficult, subjective and complex
judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported
under different conditions or using different assumptions. Pursuant to U.S. GAAP, we are required to make certain assumptions
and estimates in preparing our financial statements, including in determining credit loss reserves, reserves related to litigation and
the fair value of certain assets and liabilities, among other items. If assumptions or estimates underlying our financial statements
are incorrect, we may experience material losses.