Huntington National Bank 2014 Annual Report Download - page 21

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As a bank holding company, we must act as a source of financial and managerial strength to the Bank.
Under the Dodd-Frank Act, a bank holding company must act as a source of financial and managerial strength to each of its
subsidiary banks and must commit resources to support each such subsidiary bank. The Federal Reserve may require a bank holding
company to make capital injections into a troubled subsidiary bank. It may charge the bank holding company with engaging in unsafe
and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that
the Federal Reserve believes might jeopardize the bank holding company’s ability to commit resources to such subsidiary bank.
Any loans by a holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, an appointed bankruptcy trustee will
assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank.
Moreover, the bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the
claims of the institution's general unsecured creditors, including the holders of its note obligations.
Federal law permits the OCC to order the pro-rata assessment of shareholders of a national bank whose capital stock has become
impaired, by losses or otherwise, to relieve a deficiency in such national bank’s capital stock. This statute also provides for the
enforcement of any such pro-rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale,
to the extent necessary, of the capital stock owned by any assessed shareholder failing to pay the assessment. As the sole shareholder
of the Bank, we are subject to such provisions.
Moreover, the claims of a receiver of an insured depository institution for administrative expenses and the claims of holders of
deposit liabilities of such an institution are accorded priority over the claims of general unsecured creditors of such an institution,
including the holders of the institution's note obligations, in the event of liquidation or other resolution of such institution. Claims of a
receiver for administrative expenses and claims of holders of deposit liabilities of the Bank, including the FDIC as the insurer of such
holders, would receive priority over the holders of notes and other senior debt of the Bank in the event of liquidation or other
resolution and over our interests as sole shareholder of the Bank.
Bank transactions with affiliates.
Federal banking law and regulation imposes qualitative standards and quantitative limitations upon certain transactions by a bank
with its affiliates, including the bank’s bank holding company and certain companies the bank holding company may be deemed to
control for these purposes. Transactions covered by these provisions must be on arm’s-length terms, and cannot exceed certain
amounts which are determined with reference to the bank’s regulatory capital. Moreover, if the transaction is a loan or other extension
of credit, it must be secured by collateral in an amount and quality expressly prescribed by statute, and if the affiliate is unable to
pledge sufficient collateral, the bank holding company may be required to provide it.
Provisions added by the Dodd-Frank Act expanded the scope of (i) the definition of affiliate to include any investment fund
having any bank or BHC-affiliated company as an investment advisor, (ii) credit exposures subject to the prohibition on the
acceptance of low-quality assets or securities issued by an affiliate as collateral, the quantitative limits, and the collateralization
requirements to now include credit exposures arising out of derivative, repurchase agreement, and securities lending/borrowing
transactions, and (iii) transactions subject to quantitative limits to now also include credit collateralized by affiliate-issued debt
obligations that are not securities. In addition, these provisions require that a credit extension to an affiliate remain secured in
accordance with the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at the
inception or upon material modification of the transaction. They also raise significantly the procedural and substantive hurdles
required to obtain a regulatory exemption from the affiliate transaction requirements. While these provisions became effective on July
21, 2012, the Federal Reserve has not yet issued a proposed rule to implement them.
As a financial holding company, we are subject to additional laws and regulations.
In order to maintain its status as a financial holding company, a bank holding company's depository subsidiaries must all be both
well-capitalized and well-managed, and must meet their Community Reinvestment Act obligations.
Financial holding company powers relate to financial activities that are specified in the Bank Holding Company Act or
determined by the Federal Reserve, in coordination with the Secretary of the Treasury, to be financial in nature, incidental to an
activity that is financial in nature, or complementary to a financial activity, provided that the complementary activity does not pose a
safety and soundness risk. In addition, we are required by the Bank Holding Company Act to obtain Federal Reserve approval prior
to acquiring, directly or indirectly, ownership or control of voting shares of any bank, if, after such acquisition, we would own or
control more than 5% of its voting stock. Furthermore, the Dodd-Frank Act added a new provision to the Bank Holding Company
Act, which requires bank holding companies with total consolidated assets equal to or greater than $50 billion to obtain prior approval
from the Federal Reserve to acquire a nondepository company having total consolidated assets of $10 billion or more.