PNC Bank 2013 Annual Report Download - page 49

expectations that the OCC began communicating to large
banks in 2010, would establish standards governing, among
other things, the roles, responsibilities and organizational
structure of the risk management and internal audit functions
of large national banks, and the role and responsibilities of a
bank’s Board of Directors in overseeing the bank’s risk
governance framework. The standards have not been finalized
and remain subject to modification. However, if the standards
were adopted as proposed, we do not expect that the standards
would have a material effect on PNC.
On February 18, 2014, the Federal Reserve adopted final rules
to implement enhanced prudential standards relating to
liquidity and overall risk management for U.S. bank holding
companies with total consolidated assets of $50 billion or
more, as required under section 165 of Dodd-Frank. The final
rules also implement the provisions of Dodd-Frank that
require the Federal Reserve to impose a maximum debt-to-
equity ratio on a bank holding company if the Financial
Stability Oversight Council determines that, among other
things, the company poses a grave threat to the financial
stability of the United States. For additional information
regarding these final rules, as well as the other enhanced
prudential standards that the Federal Reserve is required to
establish under section 165 of Dodd-Frank, please see the
Supervision and Regulation section of Item 1 Business and
Item 1A Risk Factors of this Report.
On July 31, 2013, the United States District Court for the
District of Columbia granted summary judgment to the
plaintiffs in NACS, et al. v. Board of Governors of the Federal
Reserve System. The decision vacated the debit card
interchange and network processing rules that went into effect
in October 2011 and that were adopted by the Federal Reserve
to implement provisions of Dodd-Frank. The court found
among other things that the debit card interchange fees
permitted under the rules allowed card issuers to recover costs
that were not permitted by the statute. The court has stayed its
decision pending appeal, and the United States Court of
Appeals for the District of Columbia Circuit granted an
expedited appeal. Briefing has been completed and oral
argument was held in January 2014. In light of the appeal we
do not now know the ultimate impact of the District Court’s
ruling, nor the timing of any such impact if such ruling is
affirmed or substantially affirmed on appeal, but if the ruling
were to take effect it could have a materially adverse impact
on our debit card interchange revenues. Debit card interchange
revenue for the year ended December 31, 2013 was
approximately $338 million.
For additional information concerning recent legislative and
regulatory developments, as well as certain governmental,
legislative and regulatory inquiries and investigations that may
affect PNC, please see the Supervision and Regulation section
of Item 1 Business, Item 1A Risk Factors, and Note 23 Legal
Proceedings and Note 24 Commitments and Guarantees in the
Notes To Consolidated Financial Statements in Item 8 of this
Report.
K EY F ACTORS A FFECTING F INANCIAL P ERFORMANCE
Our financial performance is substantially affected by a
number of external factors outside of our control, including
the following:
• General economic conditions, including the
continuity, speed and stamina of the current U.S.
economic expansion in general and on our customers
in particular,
• The monetary policy actions and statements of the
Federal Reserve and the Federal Open Market
Committee (FOMC),
• The level of, and direction, timing and magnitude of
movement in, interest rates and the shape of the
interest rate yield curve,
• The functioning and other performance of, and
availability of liquidity in, the capital and other
financial markets,
• Loan demand, utilization of credit commitments and
standby letters of credit, and asset quality,
• Customer demand for non-loan products and services,
• Changes in the competitive and regulatory landscape
and in counterparty creditworthiness and
performance as the financial services industry
restructures in the current environment,
• The impact of the extensive reforms enacted in the
Dodd-Frank legislation and other legislative,
regulatory and administrative initiatives and actions,
including those outlined elsewhere in this Report and
in our other SEC filings, and
• The impact of market credit spreads on asset
valuations.
In addition, our success will depend upon, among other things:
• Focused execution of strategic priorities for organic
customer growth opportunities,
• Further success in growing profitability through the
acquisition and retention of customers and deepening
relationships,
• Driving growth in acquired and underpenetrated
geographic markets, including our Southeast markets,
• Our ability to effectively manage PNC’s balance
sheet and generate net interest income,
• Revenue growth from fee income and our ability to
provide innovative and valued products to our
customers,
• Our ability to utilize technology to develop and
deliver products and services to our customers and
protect PNC’s systems and customer information,
• Our ability to enhance our critical infrastructure and
streamline our core processes,
• Our ability to manage and implement strategic
business objectives within the changing regulatory
environment,
• A sustained focus on expense management,
• Improving our overall asset quality,
• Managing the non-strategic assets portfolio and
impaired assets,
The PNC Financial Services Group, Inc. – Form 10-K 31