Fifth Third Bank 2009 Annual Report Download - page 120

ANNUAL REPORT ON FORM 10-K
118 Fifth Third Bancorp
designed to promote more medium and long-term funding of
the assets and activities of banks over a one-year time horizon.
Comments on the 2009 Basel Committee Proposals are due
by April 16, 2010, with the expectation that the Basel
Committee will release a comprehensive set of proposals by
December 31, 2010 and that final provisions will be
implemented by December 31, 2012. The U.S. bank regulators
have urged comment on the 2009 Basel Committee Proposals.
Ultimate implementation of such proposals in the U.S. will be
subject to the discretion of the U.S. bank regulators and the
regulations or guidelines adopted by such agencies may, of
course, differ from the 2009 Basel Committee Proposals and
other proposals that the Basel Committee may promulgate in
the future.
The FRB, FDIC and other bank regulatory agencies have
adopted final guidelines (the “Guidelines) for safeguarding
confidential, personal customer information. The Guidelines
require each financial institution, under the supervision and
ongoing oversight of its Board of Directors or an appropriate
committee thereof, to create, implement and maintain a
comprehensive written information security program designed
to ensure the security and confidentiality of customer
information, protect against any anticipated threats or hazards to
the security or integrity of such information and protect against
unauthorized access to or use of such information that could
result in substantial harm or inconvenience to any customer.
The Bancorp has adopted a customer information security
program that has been approved by the Bancorp’s Board of
Directors (the “Board).
The GLBA requires financial institutions to implement
policies and procedures regarding the disclosure of nonpublic
personal information about consumers to non-affiliated third
parties. In general, the statute requires explanations to
consumers on policies and procedures regarding the disclosure
of such nonpublic personal information, and, except as
otherwise required by law, prohibits disclosing such
information except as provided in the subsidiary banks policies
and procedures. The subsidiary banks have implemented a
privacy policy effective since the GLBA became law, pursuant
to which all of its existing and new customers are notified of the
privacy policies.
The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001 (the “Patriot Act), designed to deny terrorists and
others the ability to obtain access to the United States financial
system, has significant implications for depository institutions,
brokers, dealers and other businesses involved in the transfer of
money. The Patriot Act, as implemented by various federal
regulatory agencies, requires financial institutions, including the
Bancorp and its subsidiaries, to implement new policies and
procedures or amend existing policies and procedures with
respect to, among other matters, anti-money laundering,
compliance, suspicious activity and currency transaction
reporting and due diligence on customers. The Patriot Act and
its underlying regulations also permit information sharing for
counter-terrorist purposes between federal law enforcement
agencies and financial institutions, as well as among financial
institutions, subject to certain conditions, and require the FRB
(and other federal banking agencies) to evaluate the
effectiveness of an applicant in combating money laundering
activities when considering applications filed under Section 3 of
the BHCA or the Bank Merger Act. The Bancorp’s Board has
approved policies and procedures that are believed to be
compliant with the Patriot Act.
Certain mutual fund and unit investment trust custody and
administrative clients are regulated as “investment companies”
as that term is defined under the Investment Company Act of
1940, as amended (the “ICA), and are subject to various
examination and reporting requirements. The provisions of the
ICA and the regulations promulgated thereunder prescribe the
type of institution that may act as a custodian of investment
company assets, as well as the manner in which a custodian
administers the assets in its custody. As a custodian for a
number of investment company clients, these regulations
require, among other things, that certain minimum aggregate
capital, surplus and undivided profit levels are maintained by
the subsidiary banks. Additionally, arrangements with clearing
agencies or other securities depositories must meet ICA
requirements for segregation of assets, identification of assets
and client approval. Future legislative and regulatory changes in
the existing laws and regulations governing custody of
investment company assets, particularly with respect to
custodian qualifications, may have a material and adverse
impact on the Bancorp. Currently, management believes the
Bancorp is in compliance with all minimum capital and
securities depository requirements. Further, the Bancorp is not
aware of any proposed or pending regulatory developments,
which, if approved, would adversely affect its ability to act as
custodian to an investment company.
Investment companies are also subject to extensive record
keeping and reporting requirements. These requirements dictate
the type, volume and duration of the record keeping the
Bancorp undertakes, either in the role as custodian for an
investment company or as a provider of administrative services
to an investment company. Further, specific ICA guidelines
must be followed when calculating the net asset value of a
client mutual fund. Consequently, changes in the statutes or
regulations governing recordkeeping and reporting or valuation
calculations will affect the manner in which operations are
conducted.
New legislation or regulatory requirements could have a
significant impact on the information reporting requirements
applicable to the Bancorp and may in the short term adversely
affect the Bancorp’s ability to service clients at a reasonable
cost. Any failure to provide such support could cause the loss of
customers and have a material adverse effect on financial
results. Additionally, legislation or regulations may be proposed
or enacted to regulate the Bancorp in a manner that may
adversely affect financial results. Furthermore, the mutual fund
industry may be significantly affected by new laws and
regulations.
The GLBA amended the federal securities laws to
eliminate the blanket exceptions that banks traditionally have
had from the definition of “broker” and “dealer.” The GLBA
also required that there be certain transactional activities that
would not be “brokerage” activities, which banks could effect
without having to register as a broker. In September 2007, the
FRB and SEC approved Regulation R to govern bank securities
activities. Various exemptions permit banks to conduct
activities that would otherwise constitute brokerage activities
under the securities laws. Those exemptions include conducting
brokerage activities related to trust, fiduciary and similar
services, certain services and also conducting a de minimis
number of riskless principal transactions, certain asset-backed
transactions and certain securities lending transactions. The
Bancorp only conducts non-exempt brokerage activities through
its affiliated registered broker-dealer.
The Sarbanes-Oxley Act of 2002, (Sarbanes-Oxley)
implements a broad range of corporate governance and