Ally Bank 2012 Annual Report Download - page 13

11
Risks Related to Regulation
Our business, financial condition, and results of operations could be adversely affected by regulations to which we are subject as a result
of our bank holding company status.
We are a bank holding company under the Bank Holding Company Act of 1956 (BHC Act). Many of the regulatory requirements to
which we are subject as a bank holding company were not applicable to us prior to December 2008 and have and will continue to require
significant expense and devotion of resources to fully implement necessary policies and procedures to ensure continued compliance.
Compliance with such laws and regulations involves substantial costs and may adversely affect our ability to operate profitably. Recent
events, particularly in the financial and real estate markets, have resulted in bank regulatory agencies placing increased focus and scrutiny on
participants in the financial services industry, including us. For a description of our regulatory requirements, see “Business—Certain
Regulatory Matters.”
Ally is subject to ongoing supervision, examination and regulation by the FRB, and Ally Bank by the FDIC and the Utah DFI, in each
case, through regular examinations and other means that allow the regulators to gauge management’s ability to identify, assess, and control
risk in all areas of operations in a safe-and-sound manner and to ensure compliance with laws and regulations.
Ally is currently required by its banking supervisors to make improvements in areas such as board and senior management oversight,
risk management, regulatory reporting, internal audit planning, capital adequacy process, stress testing, and Bank Secrecy Act / anti-money-
laundering compliance, and to continue to reduce problem assets. Separately, Ally Bank is currently required by its banking supervisors to
make improvements in areas such as compliance management and training, consumer protection monitoring, consumer complaint resolution,
internal audit program and residential mortgage loan pricing, and fee monitoring. These requirements are judicially enforceable, and if we are
unable to implement and maintain these required actions, plans, policies and procedures in a timely and effective manner and otherwise
comply with the requirements outlined above, we could become subject to formal supervisory actions which could subject us to significant
restrictions on our existing business or on our ability to develop any new business. Such forms of supervisory action could include, without
limitation, written agreements, cease and desist orders, and consent orders and may, among other things, result in restrictions on our ability to
pay dividends, requirements to increase capital, restrictions on our activities, the imposition of civil monetary penalties, and enforcement of
such action through injunctions or restraining orders. We could also be required to dispose of certain assets and liabilities within a prescribed
period. The terms of any such supervisory action could have a material adverse effect on our business, operating flexibility, financial
condition, and results of operations.
Our ability to engage in certain activities may be adversely affected by our status as a bank holding company.
As a bank holding company, Ally’s activities are generally limited to banking or to managing or controlling banks or to other activities
deemed closely related to banking or otherwise permissible under the BHC Act and related regulations. Likewise, subject to certain
exceptions, Ally is not permitted to acquire more than 5% of any class of voting shares of any nonaffiliated bank or bank holding company,
directly or indirectly, or to acquire control of any other company, directly or indirectly (including by acquisition of 25% or more of a class of
voting shares). Upon our bank holding company approval, we were permitted an initial two-year grace period to bring our activities and
investments into conformity with these restrictions. This grace period expired in December 2010. The FRB then granted two one-year
extensions that expired in December 2012, and recently granted a third and final one-year extension that expires in December 2013. We will
not be permitted to apply to the FRB for any further extensions. Certain of Ally’s existing activities and investments are deemed
impermissible under the BHC Act and must be terminated or disposed of by the expiration of this extension, the most significant of which
includes most of our insurance activities and our SmartAuction vehicle remarketing services for third parties. While these activities may be
continued if Ally is able to convert to a financial holding company under the BHC Act, Ally may be unable to satisfy the requirements to
enable it to convert to a financial holding company prior to that time, and activities, businesses, or investments that would be permissible for a
financial holding company will need to be terminated or disposed of. This could have a material adverse effect on our business, results of
operations, and financial position.
As a bank holding company, our ability to expand into new business activities would require us to obtain the prior approval of the
relevant banking supervisors. There can be no assurance that any required approval will be obtained or that we will be able to execute on any
such plans in a timely manner or at all. If we are unable to obtain approval to expand into new business activities, our business, results of
operations, and financial position may be materially adversely affected.
Our ability to execute our business strategy may be affected by regulatory considerations.
Our business strategy for Ally Bank, which is primarily focused on automotive lending and growth of our direct-channel deposit
business, is subject to regulatory oversight from a safety and soundness perspective. If our banking supervisors raise concerns regarding any
aspect of our business strategy for Ally Bank, we may be obliged to alter our strategy, which could include moving certain activities, such as
certain types of lending, outside of Ally Bank to one of our nonbanking affiliates. Alternative funding sources outside of Ally Bank, such as
asset securitization or financings in the capital markets, could be more expensive than funding through Ally Bank and could adversely affect
our business prospects, results of operations and financial condition.
We are subject to new capital planning and systemic risk regimes, which impose significant restrictions and requirements.
As a bank holding company with $50 billion or more of consolidated assets, Ally is required to conduct periodic stress tests and submit a
proposed capital action plan to the FRB every January, which the FRB must take action on by the following March. The proposed capital
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Ally Financial Inc. • Form 10-K