US Bank 2012 Annual Report Download - page 150

have resulted in, and may continue to result in, significant
write-downs of asset values by the Company and other
financial institutions. Additionally, certain European countries
have experienced credit deterioration primarily due to
excessive debt levels, poor economic conditions, and fiscal
disorder. Deterioration in economic conditions in Europe
could slow the recovery of the domestic economy or
negatively impact the Company’s borrowers or other
counterparties that have direct or indirect exposure to Europe.
Additional negative market developments may further erode
consumer confidence levels and may cause adverse changes in
payment patterns, causing increases in delinquencies and
default rates. Such developments could increase the
Company’s charge-offs and provision for credit losses.
Continuing economic deterioration that affects household or
corporate incomes could also result in reduced demand for
credit or fee-based products and services. A worsening of
these conditions would likely exacerbate the lingering effects
of the difficult market conditions experienced by the
Company and others in the financial services industry.
Proposed rulemaking may adversely affect the Company The
Company’s regulators have recently proposed rules under the
Dodd-Frank Wall Street Reform and Consumer Protection
Act (the “Dodd-Frank Act”) that impact the Company, and
the Company expects to continue to face increased regulation.
These regulations may affect the manner in which the
Company does business and the products and services that it
provides, affect or restrict the Company’s ability to compete
in its current businesses or its ability to enter into or acquire
new businesses, reduce or limit the Company’s revenue or
impose additional fees, assessments or taxes on the Company,
intensify the regulatory supervision of the Company and the
financial services industry, and adversely affect the Company’s
business operations or have other negative consequences.
The Dodd-Frank Act was signed into law in 2010 and
mandated the most wide-ranging overhaul of financial
industry regulation in decades. This legislation, among other
things, established a Consumer Financial Protection Bureau
(the “CFPB”) with broad authority to administer and enforce
a new federal regulatory framework of consumer financial
regulation. Since its establishment in 2012, the CFPB has
become active in its oversight of business practices relating to
various consumer financial products, resulting in fines and
penalties against certain of the Company’s competitors. The
Dodd-Frank Act also enhanced the regulation of consumer
mortgage banking and gave authority to the new CFPB to
implement mortgage regulations. Proposed and anticipated
mortgage rules could dramatically alter how the industry
makes mortgage loans as changes are being made throughout
the life cycle of a loan, from application to origination to
servicing. In addition, many of the other provisions of the
Dodd-Frank Act have extended implementation periods and
delayed effective dates and still require extensive rulemaking,
guidance and interpretation by various regulatory agencies.
Accordingly, in many respects, the ultimate impact of the
legislation and its effects on the United States financial system
and the Company still remain uncertain. Nevertheless, the
Company expects that the Dodd-Frank Act, including current
and future rules implementing its provisions and the
interpretations of those rules, will have a detrimental impact
on revenues and expenses, require the Company to change
certain of its business practices, intensify the regulatory
supervision of the Company and the financial services
industry, increase the Company’s capital requirements and
impose additional assessments and costs on the Company, and
otherwise adversely affect the Company’s business.
Other changes in the laws, regulations and policies governing
financial services companies could alter the Company’s
business environment and adversely affect operations The
Board of Governors of the Federal Reserve System regulates
the supply of money and credit in the United States. Its fiscal
and monetary policies determine in a large part the
Company’s cost of funds for lending and investing and the
return that can be earned on those loans and investments,
both of which affect the Company’s net interest margin.
Federal Reserve Board policies can also materially affect the
value of financial instruments that the Company holds, such
as debt securities, certain mortgage loans held for sale and
mortgage servicing rights (“MSRs”). Its policies also can
affect the Company’s borrowers, potentially increasing the
risk that they may fail to repay their loans or satisfy their
obligations to the Company. Changes in policies of the
Federal Reserve Board are beyond the Company’s control and
the impact of changes in those policies on the Company’s
activities and results of operations can be difficult to predict.
The Company and its bank subsidiaries are heavily
regulated at the federal and state levels. This regulation is to
protect depositors, federal deposit insurance funds and the
banking system as a whole. Congress and state legislatures
and federal and state agencies continually review banking
laws, regulations and policies for possible changes. Changes in
statutes, regulations or policies could affect the Company in
substantial and unpredictable ways, including limiting the
types of financial services and products that the Company
offers and/or increasing the ability of non-banks to offer
competing financial services and products. The Company
cannot predict whether any of this potential legislation will be
enacted, and if enacted, the effect that it or any regulations
would have on the Company’s financial condition or results of
operations.
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