SunTrust 2013 Annual Report Download - page 26

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good-faith efforts should include an assessment of which banking entity activities are covered by the Volcker Rule and any
final implementing regulations and development of a plan to conform these activities to the Volcker Rule/final implementing
regulations by July 21, 2014, which was the original conformance date. We have undertaken such good faith planning efforts.
The regulatory agencies released final implementing regulations on December 10, 2013, which extended the conformance
date and good faith planning requirements to July 21, 2015. Although we do not have a designated proprietary trading operation,
the scope of the proprietary trading prohibition and its impact on us depends on certain definitions in the final implementing
regulations, particularly those definitions related to exemptions for market making, hedging activities and customer trading.
While we are assessing the impact of the final regulations, we believe that the impact to revenues associated with the Volcker
Rule will be immaterial. The final regulations will also require us to establish and maintain an internal compliance program
to monitor and assure compliance with the Volcker Rule, which will impose ongoing compliance costs on us.
The Dodd-Frank Act created a new regulatory framework for the U.S. OTC derivatives markets with jurisdiction being 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. In 2013,
SunTrust 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 incentives and conflicts of interest), and mandatory
clearing of certain standardized swaps designated by the CFTC, such as most interest rate swaps. While the SEC has proposed
most of its core regulations for security-based swaps, most of its new requirements await final regulations and are expected
to be similar to the CFTC rules for swaps. Moreover, we expect our derivatives business will become subject to additional
substantive requirements, including margin requirements in excess of current market practice, increased capital requirements
and exchange trading requirements. These new rules collectively will impose implementation and ongoing compliance burdens
on us and will introduce additional legal risk, including as a result of newly applicable anti-fraud and anti-manipulation
provisions and private rights of action.
Additionally, the relevant regulatory agencies have proposed rules to implement the Dodd-Frank Act provisions requiring
retention of risk by certain securitization participants through holding interests in the securitization vehicles, but the rules are
not yet finalized or effective. As a result, the ultimate impact of these Dodd-Frank Act provisions on us remains unpredictable.
The impact on us could be direct, by requiring us to hold interests in a securitization vehicle or other assets that represent a
portion of the credit risk held by the securitization vehicle, or indirect, by impacting markets in which we participate. Since
the beginning of the financial crisis, there has been and continues to be substantially less private (that is, non-government
backed) securitization activity than had previously been the case. It is unclear at present whether and to what extent the private
securitization markets will rebound. In recent years we have only engaged in securitization transactions to a limited extent
under circumstances where we might expect to be required to retain additional risk on our balance sheet as a result of
implementation of these Dodd-Frank Act provisions. If the market for private securitizations rebounds and we decide to
increase our participation in that market, we would likely be required under the regulations to retain more risk than would
otherwise have been the case, with currently uncertain financial impact. In addition, other securitization reforms mandated
by the Dodd-Frank Act or implemented or proposed by the SEC may have the effect of limiting our ability to execute, or
increase the cost of, securitization transactions. The impact of such reforms on our business is uncertain and difficult to
quantify.
In February 2011, the White House delivered a report to Congress regarding proposals to reform the housing finance market
in the U.S. The report, among other things, outlined various potential proposals to wind down the GSEs and reduce or eliminate
over time the role of the GSEs in guaranteeing mortgages and providing funding for mortgage loans, as well as proposals to
implement reforms relating to borrowers, lenders, and investors in the mortgage market, including reducing the maximum
size of a loan that the GSEs can guarantee, phasing in a minimum down payment requirement for borrowers, improving
underwriting standards, and increasing accountability and transparency in the securitization process. The extent and timing
of any regulatory reform regarding the GSEs and the home mortgage market, as well as any effect on our business and financial
results, are uncertain.
Additionally, legislation or regulation may impose unexpected or unintended consequences, the impact of which is difficult
to predict. For example, some commentators have expressed a view that proposed liquidity requirements, which will require
certain banks to hold more liquid securities, may have the unintended consequence of reducing the size of the trading markets
for such securities and thereby reduce liquidity in those markets.
Any other future legislation and/or regulation, if adopted, also could have a material adverse effect on our business operations,
income, and/or competitive position and may have other negative consequences. For additional information, see the
“Government Supervision and Regulation” section in this Form 10-K.