SunTrust 2014 Annual Report Download - page 38

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Third parties with whom we do business or that facilitate
our business activities, including exchanges, clearing houses,
financial intermediaries, or vendors that provide services or
security solutions for our operations, could also be sources of
operational and information security risk to us, including from
breakdowns or failures of their own systems or capacity
constraints.
Although to date we have not experienced any material
losses relating to cyber-attacks or other information security
breaches, there can be no assurance that we will not suffer such
losses in the future. Our risk and exposure to these matters
remains heightened because of, among other things, the
evolving nature of these threats, our prominent size and scale
and our role in the financial services industry, our plans to
continue to implement our internet banking and mobile banking
channel strategies and develop additional remote connectivity
solutions to serve our clients when and how they want to be
served, our expanded geographic footprint, the outsourcing of
some of our business operations, and the continued uncertain
global economic environment. As a result, cybersecurity and the
continued development and enhancement of our controls,
processes, and practices designed to protect our systems,
computers, software, data and networks from attack, damage,
or unauthorized access remain a focus for us. As threats continue
to evolve, we may be required to expend additional resources
to continue to modify or enhance our protective measures or to
investigate and remediate information security vulnerabilities.
As a necessary aspect of operating our business we must
provide access to customer and sensitive company information
to our employees, contractors, consultants, third parties and
other authorized entities. Controls and oversight mechanisms
are in place to limit access to this information and protect it from
unauthorized disclosure or theft. Control systems and policies
pertaining to system access are subject to errors in design,
oversight failure, software failure, intentional subversion or
other compromise resulting in theft, error, loss or inappropriate
use of information or systems to commit fraud, cause
embarrassment to the company or its executives or to gain
competitive advantage.
Additionally, the FRB, the CFPB, and other regulators
expect financial institutions to be responsible for all aspects of
their performance, including aspects which they delegate to third
parties. Disruptions or failures in the physical infrastructure or
operating systems that support our businesses and clients, or
cyber-attacks or security breaches of the networks, systems,
devices, or software that our clients use to access our products
and services could result in client attrition, regulatory fines,
penalties or intervention, reputational damage, reimbursement
or other compensation costs, and/or additional compliance
costs, any of which could materially adversely affect our results
of operations or financial condition.
The soundness of other financial institutions could adversely
affect us.
Our ability to engage in routine funding transactions could
be adversely affected by the actions and commercial soundness
of other financial institutions. Financial services institutions are
interrelated as a result of trading, clearing, counterparty, or other
relationships. We have exposure to many different industries
and counterparties, and we routinely execute transactions with
counterparties in the financial industry, including brokers and
dealers, commercial banks, investment banks, mutual and hedge
funds, and other institutional clients. As a result, defaults by, or
even rumors or questions about, one or more financial services
institution, or the financial services industry generally, in the
past have led to market-wide liquidity problems and could lead
to losses or defaults by us or by other institutions. Many of these
transactions expose us to credit risk in the event of default of
our counterparty or client. In addition, our credit risk may be
exacerbated when the collateral held by us cannot be realized
or is liquidated at prices not sufficient to recover the full amount
of the financial instrument exposure due us. There is no
assurance that any such losses would not materially and
adversely affect our results of operations.
We depend on the accuracy and completeness of information
about clients and counterparties.
In deciding whether to extend credit or enter into other
transactions with clients and counterparties, we may rely on
information furnished by or on behalf of clients and
counterparties, including financial statements and other
financial information. We also may rely on representations of
clients and counterparties as to the accuracy and completeness
of that information and, with respect to financial statements, on
reports of independent auditors.
Competition in the financial services industry is intense and
we could lose business or suffer margin declines as a result.
We operate in a highly competitive industry that could
become even more competitive as a result of reform of the
financial services industry resulting from the Dodd-Frank Act
and other legislative, regulatory, and technological changes, and
from continued consolidation. We face aggressive competition
from other domestic and foreign lending institutions and from
numerous other providers of financial services. The ability of
nonbanking financial institutions to provide services previously
limited to commercial banks has intensified competition.
Because nonbanking financial institutions are not subject to the
same regulatory restrictions as banks and bank holding
companies, they can often operate with greater flexibility and
lower cost structures. Securities firms and insurance companies
that elect to become financial holding companies can offer
virtually any type of financial service, including banking,
securities underwriting, insurance (both agency and
underwriting) and merchant banking, and may acquire banks
and other financial institutions. This may significantly change
the competitive environment in which we conduct business.
Some of our competitors have greater financial resources and/
or face fewer regulatory constraints. As a result of these various
sources of competition, we could lose business to competitors
or be forced to price products and services on less advantageous
terms to retain or attract clients, either of which would adversely
affect our profitability.
Maintaining or increasing market share depends on market
acceptance and regulatory approval of new products and
services.
Our success depends, in part, on our ability to adapt