US Bank 2011 Annual Report Download - page 137

provision for credit losses. Continuing economic deterioration
that affects household or corporate incomes could also result
in reduced demand for credit or fee-based products and
services. A worsening of these conditions would likely
exacerbate the lingering effects of the difficult market
conditions experienced by the Company and others in the
financial services industry.
Recently passed and proposed legislation and rulemaking
may adversely affect the Company The United States
government and the Company’s regulators have recently
passed and proposed legislation and rules that impact the
Company, and the Company expects to continue to face
increased regulation. These laws and regulations may affect
the manner in which the Company does business and the
products and services that it provides, affect or restrict the
Company’s ability to compete in its current businesses or its
ability to enter into or acquire new businesses, reduce or limit
the Company’s revenue or impose additional fees, assessments
or taxes on the Company, intensify the regulatory supervision
of the Company and the financial services industry, and
adversely affect the Company’s business operations or have
other negative consequences.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act was signed into law in 2010 and mandates the
most wide-ranging overhaul of financial industry regulation in
decades. This legislation, among other things, establishes a
Consumer Financial Protection Bureau with broad authority
to administer and enforce a new federal regulatory framework
of consumer financial regulation, changes the base for deposit
insurance assessments, introduces regulatory rate-setting for
interchange fees charged to merchants for debit card
transactions, enhances the regulation of consumer mortgage
banking, limits the pre-emption of state laws applicable to
national banks, and excludes certain instruments currently
included in determining the Company’s Tier 1 regulatory
capital ratio. Many of the legislation’s provisions have
extended implementation periods and delayed effective dates
and will require rulemaking by various regulatory agencies.
Accordingly, the Company cannot currently quantify the
ultimate impact of this legislation and the related future
rulemaking, but expects that the legislation will have a
detrimental impact on revenues and expenses, require the
Company to change certain of its business practices, intensify
the regulatory supervision of the Company and the financial
services industry, increase the Company’s capital requirements
and impose additional assessments and costs on the Company,
and otherwise adversely affect the Company’s business.
Other changes in the laws, regulations and policies
governing financial services companies could alter the
Company’s business environment and adversely affect
operations The Board of Governors of the Federal Reserve
System regulates the supply of money and credit in the United
States. Its fiscal and monetary policies determine in a large
part the Company’s cost of funds for lending and investing
and the return that can be earned on those loans and
investments, both of which affect the Company’s net interest
margin. Federal Reserve Board policies can also materially
affect the value of financial instruments that the Company
holds, such as debt securities, certain mortgage loans held for
sale and mortgage servicing rights (“MSRs”). Its policies also
can affect the Company’s borrowers, potentially increasing
the risk that they may fail to repay their loans or satisfy their
obligations to the Company. Changes in policies of the
Federal Reserve Board are beyond the Company’s control and
the impact of changes in those policies on the Company’s
activities and results of operations can be difficult to predict.
The Company and its bank subsidiaries are heavily
regulated at the federal and state levels. This regulation is to
protect depositors, federal deposit insurance funds and the
banking system as a whole. Congress and state legislatures and
federal and state agencies continually review banking laws,
regulations and policies for possible changes. Changes in
statutes, regulations or policies could affect the Company in
substantial and unpredictable ways, including limiting the types
of financial services and products that the Company offers and/
or increasing the ability of non-banks to offer competing
financial services and products. The Company cannot predict
whether any of this potential legislation will be enacted, and if
enacted, the effect that it or any regulations would have on the
Company’s financial condition or results of operations.
The Company’s lending businesses and the value of the
loans and debt securities it holds may be adversely
affected by economic conditions, including a reversal or
slowing of the current moderate recovery. Downward
valuation of debt securities could also negatively impact
the Company’s capital position Given the high percentage of
the Company’s assets represented directly or indirectly by
loans, and the importance of lending to its overall business,
weak economic conditions are likely to have a negative impact
on the Company’s business and results of operations. This
could adversely impact loan utilization rates as well as
delinquencies, defaults and customer ability to meet
obligations under the loans. This is particularly the case
during the period in which the aftermath of recessionary
conditions continues and the positive effects of economic
recovery appear to be slow to materialize and unevenly spread
among the Company’s customers.
Further, weak economic conditions would likely have a
negative impact on the Company’s business, its ability to serve
its customers, and its results of operations. Such conditions are
likely to lead to increases in the number of borrowers who
become delinquent or default or otherwise demonstrate a
decreased ability to meet their obligations under their loans. This
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