Huntington National Bank 2015 Annual Report Download - page 33

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significantly impact our required credit reserves. Other impacts to capital levels, profit and loss, and various financial metrics will
also result.
Compliance Risks:
1. Bank regulations regarding capital and liquidity, including the annual CCAR assessment process and the Basel III capital
and liquidity standards, could require higher levels of capital and liquidity. Among other things, these regulations could
impact our ability to pay common stock dividends, repurchase common stock, attract cost-effective sources of deposits, or
require the retention of higher amounts of low yielding securities.
The Federal Reserve administers the annual CCAR, an assessment of the capital adequacy of bank holding companies with
consolidated assets of $50 billion or more and of the practices used by covered banks to assess capital needs. Under CCAR, the
Federal Reserve makes a qualitative assessment of capital adequacy on a forward-looking basis and reviews the strength of a bank
holding company’s capital adequacy process. The Federal Reserve also makes a quantitative assessment of capital based on
supervisory-run stress tests that assess the ability to maintain capital levels above each minimum regulatory capital ratio and above a
CET1 ratio of 4.5%, after making all capital actions included in a bank holding company’s capital plan, under baseline and stressful
conditions throughout a nine-quarter planning horizon. Capital plans for 2016 are required to be submitted by April 5, 2016, and the
Federal Reserve will either object to the capital plan and/or planned capital actions, or provide a notice of non-objection, no later than
June 30, 2016. We intend to submit our capital plan to the Federal Reserve on or before April 5, 2016. The Bank also must submit a
capital plan to the OCC on or before April 5, 2016. There can be no assurance that the Federal Reserve will respond favorably to our
capital plan, capital actions or stress test and the Federal Reserve, OCC, or other regulatory capital requirements may limit or
otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases.
In 2013, the Federal Reserve and the OCC adopted final rules to implement the Basel III capital rules for U.S. Banking
organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel
III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act.
Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations.
As a Standardized Approach institution, the Basel III minimum capital requirements became effective for us on January 1, 2015, and
will be fully phased-in on January 1, 2019.
On September 3, 2014, the U.S. banking regulators approved a final rule to implement a minimum liquidity coverage ratio
(LCR) requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR
requirement to depository institution holding companies below the threshold but with total consolidated assets of $50 billion or more.
The LCR requires covered banking organizations to maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day
stress scenario. We are covered by the modified LCR requirement and therefore subject to the phase-in of the rule beginning January
2016 at 90% and January 2017 at 100%. We will also be required to calculate the LCR monthly. The LCR assigns less severe outflow
assumptions to certain types of customer deposits, which should increase the demand, and perhaps the cost, among banks for these
deposits. Additionally, the HQLA requirements will increase the demand for direct US government and US government- guaranteed
debt that, while high quality, generally carry lower yields than other securities that banks hold in their investment portfolios.
2. If our regulators deem it appropriate, they can take regulatory actions that could result in a material adverse impact on our
financial results, ability to compete for new business, or preclude mergers or acquisitions. In addition, regulatory actions
could constrain our ability to fund our liquidity needs or pay dividends. Any of these actions could increase the cost of our
services.
We are subject to the supervision and regulation of various state and federal regulators, including the OCC, Federal Reserve,
FDIC, SEC, CFPB, Financial Industry Regulatory Authority, and various state regulatory agencies. As such, we are subject to a wide
variety of laws and regulations, many of which are discussed in the Regulatory Matters section. As part of their supervisory process,
which includes periodic examinations and continuous monitoring, the regulators have the authority to impose restrictions or conditions
on our activities and the manner in which we manage the organization. Such actions could negatively impact us in a variety of ways,
including charging monetary fines, impacting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to
offer certain products or services, or imposing additional capital requirements.
With the addition of the CFPB, our consumer products and services are subject to increasing regulatory oversight and scrutiny
with respect to compliance under consumer laws and regulations. We may face a greater number or wider scope of investigations,
enforcement actions, and litigation in the future related to consumer practices, thereby increasing costs associated with responding to
or defending such actions. In addition, increased regulatory inquiries and investigations, as well as any additional legislative or
regulatory developments affecting our consumer businesses, and any required changes to our business operations resulting from these
developments, could result in significant loss of revenue, require remuneration to our customers, trigger fines or penalties, limit the
products or services we offer, require us to increase our prices and, therefore, reduce demand for our products, impose additional
compliance costs on us, cause harm to our reputation, or otherwise adversely affect our consumer businesses.