Huntington National Bank 2010 Annual Report Download - page 33

continuous monitoring, the regulators have the authority to impose restrictions or conditions on our activities
and the manner in which we manage the organization. These actions could impact the organization in a variety
of ways, including subjecting us to monetary fines, restricting our ability to pay dividends, precluding mergers
or acquisitions, limiting our ability to offer certain products or services, or imposing additional capital
requirements.
2. Legislative and regulatory actions taken now or in the future to address the current liquidity and
credit crisis in the financial industry may materially adversely affect us by increasing our costs,
adding complexity in doing business, impeding the efficiency of our internal business processes,
negatively impacting the recoverability of certain of our recorded assets, requiring us to increase
our regulatory capital, limiting our ability to pursue business opportunities, and otherwise materially
adversely impacting our financial condition, results of operation, liquidity, or stock price.
Current economic conditions, particularly in the financial markets, have resulted in government regulatory
agencies and political bodies placing increased focus on and scrutiny of the financial services industry. The
U.S. Government has intervened on an unprecedented scale, responding to what has been commonly referred
to as the financial crisis. In addition to the previously enacted governmental assistance programs designed to
stabilize and stimulate the U.S. economy, recent economic, political, and market conditions have led to
numerous programs and proposals to reform the financial regulatory system and prevent future crises.
On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank Act represents a
comprehensive overhaul of the financial services industry within the United States, establishes the new federal
CFPB, and requires the bureau and other federal agencies to implement many new and significant rules and
regulations. At this time, it is difficult to predict the extent to which the Dodd-Frank Act or the resulting rules
and regulations will impact our business. Compliance with these new laws and regulations may result in
additional costs, which could be significant, and may have a material and adverse effect on our results of
operations.
In addition, international banking industry regulators have largely agreed upon significant changes in the
regulation of capital required to be held by banks and their holding companies to support their businesses. The
new international rules, known as Basel III, generally increase the capital required to be held and narrow the
types of instruments which will qualify as providing appropriate capital and impose a new liquidity
measurement. The Basel III requirements are complex and will be phased in over many years.
The Basel III rules do not apply to U.S. banks or holding companies automatically. Among other things,
the Dodd-Frank Act requires U.S. regulators to reform the system under which the safety and soundness of
banks and other financial institutions, individually and systemically, are regulated. That reform effort will
include the regulation of capital and liquidity. It is not known whether or to what extent the U.S. regulators
will incorporate elements of Basel III into the reformed U.S. regulatory system, but it is expected that the
U.S. reforms will include an increase in capital requirements, a narrowing of what qualifies as appropriate
capital, and impose a new liquidity measurement. One likely effect of a significant tightening of U.S. capital
requirements would be to increase our cost of capital, among other things. Any permanent significant increase
in our cost of capital could have significant adverse impacts on the profitability of many of our products, the
types of products we could offer profitably, our overall profitability, and our overall growth opportunities,
among other things. Although most financial institutions would be affected, these business impacts could be
felt unevenly, depending upon the business and product mix of each institution. Other potential effects could
include less ability to pay cash dividends and repurchase our common shares, higher dilution of common
shareholders, and a higher risk that we might fall below regulatory capital thresholds in an adverse economic
cycle.
Item 1B: Unresolved Staff Comments
None.
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