Fifth Third Bank 2013 Annual Report Download - page 37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
35 Fifth Third Bancorp
changes to Fifth Third’s businesses, result in increased compliance
costs and affect the profitability of such businesses. Additionally,
reform could affect the behaviors of third parties that we deal with
in the course of our business, such as rating agencies, insurance
companies and investors. The extent to which Fifth Third can
adjust its strategies to offset such adverse impacts also is not known
at this time.
Fifth Third and/or its affiliates are or may become the subject
of litigation which could result in legal liability and damage to
Fifth Third’s reputation.
Fifth Third and certain of its directors and officers have been
named from time to time as defendants in various class actions and
other litigation relating to Fifth Third’s business and activities. Past,
present and future litigation have included or could include claims
for substantial compensatory and/or punitive damages or claims for
indeterminate amounts of damages. These matters could result in
material adverse judgments, settlements, fines, penalties, injunctions
or other relief, amendments and/or restatements of Fifth Third’s
SEC filings and/or financial statements, as applicable and/or
determinations of material weaknesses in its disclosure controls and
procedures. Like other large financial institutions and companies,
Fifth Third is also subject to risk from potential employee
misconduct, including non-compliance with policies and improper
use or disclosure of confidential information. Substantial legal
liability or significant regulatory action against Fifth Third could
materially adversely affect its business, financial condition or results
of operations and/or cause significant reputational harm to its
business.
Fifth Third’s ability to pay or increase dividends on its
common stock or to repurchase its capital stock is restricted.
Fifth Third’s ability to pay dividends or repurchase stock is subject
to regulatory requirements and the need to meet regulatory
expectations. Fifth Third is subject to an annual assessment by the
FRB as part of CCAR. The mandatory elements of the capital plan
are an assessment of the expected use and sources of capital over
the planning horizon, a description of all planned capital actions
over the planning horizon, a discussion of any expected changes to
the Bancorp’s business plan that are likely to have a material impact
on its capital adequacy or liquidity, a detailed description of the
Bancorp’s process for assessing capital adequacy and the Bancorp’s
capital policy. The capital plan must reflect the revised capital
framework that the FRB adopted in connection with the
implementation of the Basel III accord, including the framework’s
minimum regulatory capital ratios and transition arrangements. Fifth
Third’s stress testing results and 2014 capital plan were submitted to
the FRB on January 6, 2014.
The FRB’s review of the capital plan will assess the
comprehensiveness of the capital plan, the reasonableness of the
assumptions and the analysis underlying the capital plan.
Additionally, the FRB will review the robustness of the capital
adequacy process, the capital policy and the Bancorp’s ability to
maintain capital above the minimum regulatory capital ratios and
above a Tier 1 common ratio of 5 percent under baseline and
stressful conditions throughout a nine-quarter planning horizon.
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