Fifth Third Bank 2012 Annual Report Download - page 167

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165 Fifth Third Bancorp
regulations and the supervision, regulation and examination of
banks and their parent companies (such as the Bancorp) by bank
regulatory agencies are the maintenance of the safety and
soundness of financial institutions, maintenance of the federal
deposit insurance system and the protection of consumers or
classes of consumers, rather than the specific protection of
shareholders of a bank or the parent company of a bank. To the
extent the following material describes statutory or regulatory
provisions, it is qualified in its entirety by reference to the
particular statute or regulation.
Regulators
The Bancorp and/or its banking subsidiary are subject to
regulation and supervision primarily by the FRB, the Consumer
Financial Protection Bureau (the “CFPB”) and the Ohio Division
of Financial Institutions (the “Division”) and additionally by
certain other functional regulators and self-regulatory
organizations. The Bancorp is also subject to regulation by the
SEC by virtue of its status as a public company and due to the
nature of some of its businesses. The Bancorp’ s banking
subsidiary is subject to regulation by the FDIC, which insures the
bank’ s deposits as permitted by law.
The federal and state laws and regulations that are applicable
to banks and to some extent bank holding companies regulate,
among other matters, the scope of their business, their activities,
their investments, their reserves against deposits, the timing of the
availability of deposited funds, the amount of loans to individual
and related borrowers and the nature, amount of and collateral for
certain loans, and the amount of interest that may be charged on
loans. Various federal and state consumer laws and regulations
also affect the services provided to consumers.
The Bancorp and/or its subsidiary are required to file various
reports with, and are subject to examination by regulators,
including the FRB and the Division. The FRB, Division and the
CFPB have the authority to issue orders to bank holding
companies and/or banks to cease and desist from certain banking
practices and violations of conditions imposed by, or violations of
agreements with, the FRB, Division and CFPB. Certain of the
Bancorp’ s and/or its banking subsidiary regulators are also
empowered to assess civil money penalties against companies or
individuals in certain situations, such as when there is a violation
of a law or regulation. Applicable state and federal law also grant
certain regulators the authority to impose additional requirements
and restrictions on the activities of the Bancorp and or its banking
subsidiary and, in some situations, the imposition of such
additional requirements and restrictions will not be publicly
available information.
Acquisitions
The BHCA requires the prior approval of the FRB for a bank
holding company to acquire substantially all the assets of a bank
or to acquire direct or indirect ownership or control of more than
5% of any class of the voting shares of any bank, bank holding
company or savings association, or to increase any such non-
majority ownership or control of any bank, bank holding
company or savings association, or to merge or consolidate with
any bank holding company.
The BHCA prohibits a bank holding company from
acquiring a direct or indirect interest in or control of more than
5% of any class of the voting shares of a company that is not a
bank or a bank holding company and from engaging directly or
indirectly in activities other than those of banking, managing or
controlling banks or furnishing services to its banking
subsidiaries, except that it may engage in and may own shares of
companies engaged in certain activities the FRB has determined
to be so closely related to banking or managing or controlling
banks as to be proper incident thereto.
Financial Holding Companies
The Gramm-Leach-Bliley Act of 1999 (“GLBA”) permits a
qualifying bank holding company to become a financial holding
company (“FHC”) and thereby to engage directly or indirectly in
a broader range of activities than those permitted for a bank
holding company under the BHCA. Permitted activities for a
FHC include securities underwriting and dealing, insurance
underwriting and brokerage, merchant banking and other
activities that are declared by the FRB, in cooperation with the
Treasury Department, to be “financial in nature or incidental
thereto” or are declared by the FRB unilaterally to be
“complementary” to financial activities. In addition, a FHC is
allowed to conduct permissible new financial activities or acquire
permissible non-bank financial companies with after-the-fact
notice to the FRB. A bank holding company may elect to become
a FHC if each of its banking subsidiaries is well capitalized, is
well managed and has at least a “Satisfactory” rating under the
Community Reinvestment Act (“CRA”). Dodd-Frank also
extended the well capitalized and well managed requirement to
the bank holding company. In 2000, the Bancorp elected and
qualified for FHC status under the GLBA. To maintain FHC
status, a holding company must continue to meet certain
requirements. The failure to meet such requirements could result
in restrictions on the activities of the FHC or loss of FHC status.
If restrictions are imposed on the activities of an FHC, such
information may not necessarily be available to the public.
Dividends
The Bancorp depends in part upon dividends received from its
direct and indirect subsidiaries, including its indirect banking
subsidiary, to fund its activities, including the payment of
dividends. The Bancorp and its banking subsidiary are subject to
various federal and state restrictions on their ability to pay
dividends. The FRB has authority to prohibit bank holding
companies from paying dividends if such payment is deemed to
be an unsafe or unsound practice. The FRB has indicated
generally that it may be an unsafe or unsound practice for bank
holding companies to pay dividends unless a bank holding
company’ s net income is sufficient to fund the dividends and the
expected rate of earnings retention is consistent with the
organization’ s capital needs, asset quality and overall financial
condition. The ability to pay dividends may be further limited by
provisions of the Dodd-Frank Act and implanting regulations (see
the “Regulatory Reform” section).
Source of Strength
Under long-standing FRB policy and now as codified in the
Dodd-Frank Act, a bank holding company is expected to act as a
source of financial and managerial strength to each of its banking
subsidiaries and to commit resources to their support. This
support may be required at times when the bank holding company
may not have the resources to provide it.
FDIC Assessments
As contemplated by the Dodd-Frank Act the FDIC has revised the
framework by which insured depository institutions with more
than $10 billion in assets (“large IDIs”) are assessed for purposes
of payments to the Deposit Insurance Fund (the “DIF”). The final