Huntington National Bank 2015 Annual Report Download - page 25

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The FDIC separately has adopted a final rule requiring an insured depository institution with $50 billion or more in total
assets, such as the Bank, to submit periodically to the FDIC a resolution plan for the resolution of such institution in the event of
its failure. The FDIC rule requires each covered institution to provide a resolution plan that should enable the FDIC as receiver to
resolve the institution in an orderly manner that enables prompt access of insured deposits; maximizes the return from the failed
institution’s assets; and minimizes losses realized by creditors and the Deposit Insurance Fund.
We filed our resolution plans pursuant to each rule in December 2015.
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.
Transactions between the Bank and its affiliates are restricted.
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.
As a financial holding company we are permitted to engage in, and affiliate with financial companies engaging in, a broader
range of activities than would otherwise be permitted for a bank holding company. In order to maintain our status as a financial
holding company, we and the Bank must each remain “well-capitalized” and “well-managed.” In addition, the Bank must receive