SunTrust 2013 Annual Report Download - page 18

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registered with the SEC. GenSpring is an investment adviser registered with the SEC and a member of the National Futures
Association. Furthermore, under the Dodd-Frank Act, the Federal Reserve may regulate and supervise any subsidiary of the
Company to determine (i) the nature of the operations and financial condition of the company, (ii) the financial, operational
and other risks of the company, (iii) the systems for monitoring and controlling such risks, and (iv) compliance with Title I
of the Dodd-Frank Act.
The BHC Act limits the activities in which bank holding companies and their subsidiaries may engage. As a bank holding
company that has elected to become a financial holding company, the Company may engage, in addition to activities “closely
related to banking," in expanded securities activities, insurance sales, underwriting activities, and other financial activities,
and may also acquire securities firms and insurance companies, subject to certain conditions. The expanded activities in which
the Company may engage are limited to those that are (i) financial in nature or incidental to such financial activity, and/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. To maintain its status as a financial holding company, the Company and its banking subsidiary
must be “well capitalized,” and “well managed” and must maintain at least a “satisfactory” CRA rating, failing which the
Federal Reserve may, among other things, limit the Company’s ability to conduct these broader financial activities or, if the
deficiencies persist, require the Company to divest the banking subsidiary. If the 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.
There are a number of obligations and restrictions imposed on bank holding companies and their depository institution
subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such
depository institutions and to the FDIC insurance fund in the event the depository institution becomes in danger of default or
is in default, but are generally not intended for the protection of shareholders or other investors. For example, pursuant to the
Dodd-Frank Act and Federal Reserve policy, a bank holding company is required to serve as a source of financial strength to
its subsidiary depository institutions and commit resources to support such institutions, which may include circumstances in
which it might not otherwise do so.
The Company and its subsidiaries are subject to an extensive regulatory framework of complex and comprehensive federal
and state laws and regulations regulating the provision of banking and other financial services and other aspects of the
Company’s businesses and operations. Regulation and regulatory oversight have increased significantly over the past three
years, primarily as a result of the passage of the Dodd-Frank Act in 2010. The Dodd-Frank Act imposes new regulatory
requirements and oversight over banks and other financial institutions in a number of ways, among which are (i) creating the
CFPB to regulate consumer financial products and services; (ii) creating the Financial Stability Oversight Council to identify
and impose additional regulatory oversight on large financial firms; (iii) granting orderly liquidation authority to the FDIC
for the liquidation of financial corporations that pose a risk to the financial system of the U.S.; (iv) requiring financial institutions
to draft a resolution plan that contemplates the dissolution of the enterprise and submit that resolution plan to both the Federal
Reserve and the FDIC; (v) limiting debit card interchange fees; (vi) adopting certain changes to shareholder rights and
responsibilities, including a shareholder “say on pay” vote on executive compensation; (vii) strengthening the SEC's powers
to regulate securities markets; (viii) regulating OTC derivative markets; (ix) restricting variable-rate lending by requiring the
ability to repay to be determined for variable-rate loans by using the maximum rate that will apply during the first five years
of a variable-rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain
other revisions; (x) changing the base upon which the deposit insurance assessment is assessed from deposits to, substantially,
average consolidated assets minus equity, which likely increases the amount of the deposit insurance assessment collected
from SunTrust Bank; and (xi) amending the Truth in Lending Act with respect to mortgage originations, including originator
compensation, minimum repayment standards, and prepayment considerations.
One of the more important changes instituted by the Dodd-Frank Act is the requirement for twice-annual stress tests of the
Company and its bank. The performance of the Company under the stress tests and the CCAR determine the capital actions
the Company will be permitted by its regulators to take, such as dividends and share repurchases. Due to the importance and
intensity of the stress tests and the CCAR process, the Company has dedicated significant resources to comply with stress
testing requirements. These changes have profoundly impacted our policies and procedures and will likely continue to do so
as regulators adopt regulations going forward in accordance with the time table for enacting regulations set forth in the Dodd-
Frank Act.
The Dodd-Frank Act imposed a new regulatory regime for the OTC derivatives market, aimed at increasing transparency and
reducing systemic risk in the derivative markets, such as requirements for central clearing, exchange trading, capital, margin,
reporting, and recordkeeping. Jurisdiction is broadly shared by the CFTC for swaps and the SEC for security-based swaps.
In 2012 and 2013, the CFTC finalized most of its core regulations, triggering a phased-in compliance period commencing in
late 2012 and continuing throughout 2013. The Bank provisionally registered as a swap dealer with the CFTC and became
subject to new substantive requirements, including trade reporting and robust record keeping requirements, business conduct
requirements (including daily valuations, disclosure of material risks associated with swaps and disclosure of material