US Bank 2015 Annual Report Download - page 149

Litigation and Regulatory Matters The Company is subject
to various litigation and regulatory matters that arise in the
ordinary course of its business. The Company establishes
reserves for such matters when potential losses become
probable and can be reasonably estimated. The Company
believes the ultimate resolution of existing legal and regulatory
matters will not have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
However, changes in circumstances or additional information
could result in additional accruals or resolution in excess of
established accruals, which could adversely affect the
Company’s results from operations, potentially materially.
Litigation Matters In the last several years, the Company
and other large financial institutions have been sued in their
capacity as trustee for residential mortgage–backed securities
trusts. Among these lawsuits are actions originally brought in
June 2014 by a group of institutional investors, including
BlackRock and PIMCO funds, against six bank trustees,
including the Company. These actions are in early stages and
currently are pending in the Supreme Court of the State of
New York, New York County, and in the United States District
Court for the Southern District of New York. In these lawsuits,
the investors allege that U.S. Bank National Association as
trustee caused them to incur substantial losses by failing to
enforce loan repurchase obligations and failing to abide by
appropriate standards of care after events of default allegedly
occurred. The plaintiffs seek monetary damages in an
unspecified amount and also seek equitable relief.
Regulatory Matters The Company is currently subject to
examinations, inquiries and investigations by government
agencies and bank regulators concerning mortgage-related
practices, including those related to compliance with selling
guidelines relating to residential home loans sold to GSEs,
foreclosure-related expenses submitted to the Federal
Housing Administration or GSEs for reimbursement, lender-
placed insurance, and notices and filings in bankruptcy
cases. The Company is also subject to ongoing
examinations, inquiries and investigations by government
agencies, bank regulators and law enforcement with respect
to Bank Secrecy Act/anti-money laundering compliance
program adequacy and effectiveness and sanctions
compliance requirements as administered by the Office of
Foreign Assets Control. In October 2015, the Company
entered into a Consent Order with the Office of the
Comptroller of the Currency (the “OCC”) concerning
deficiencies in its Bank Secrecy Act/anti-money laundering
compliance program, and requiring an ongoing review of that
program. If the Company does not satisfactorily correct the
identified deficiencies, it could be required to enter into
further orders, pay fines or penalties or further modify its
business practices. Some of the compliance program
enhancements and other actions required by the Consent
Order have already been, or are currently in the process of
being, implemented, and are not expected to be material to
the Company.
The Company is also continually subject to examinations,
inquiries and investigations in areas of increasing regulatory
scrutiny, such as compliance, risk management, third party
risk management and consumer protection.
The Company is cooperating fully with all pending
examinations, inquiries and investigations, any of which could
lead to administrative or legal proceedings or settlements.
Remedies in these proceedings or settlements may include
fines, penalties, restitution or alterations in the Company’s
business practices (which may increase the Company’s
operating expenses and decrease its revenue).
Certain federal and state governmental authorities reached
settlement agreements in 2012 and 2013 with other major
financial institutions regarding their mortgage origination,
servicing, and foreclosure activities. Those governmental
authorities have had settlement discussions with other
financial institutions, including the Company. The Company
has not agreed to any settlement; however, if a settlement
were reached it would likely include an agreement to comply
with specified servicing standards, and settlement payments
to governmental authorities as well as a monetary
commitment that could be satisfied under various loan
modification programs (in addition to the programs the
Company already has in place).
In April 2011, the Company and certain other large
financial institutions entered into Consent Orders with the
OCC and the Board of Governors of the Federal Reserve
System relating to residential mortgage servicing and
foreclosure practices. In June 2015, the Company entered
into an agreement to amend the 2011 Consent Order it had
with the OCC. The OCC terminated the amended Consent
Order in February 2016. Depending on the Company’s
progress toward addressing the requirements of the 2011
Consent Order it has with the Board of Governors of the
Federal Reserve System, the Company may be required to
enter into further orders and settlements, pay additional fines
or penalties, make restitution or further modify the Company’s
business practices (which may increase the Company’s
operating expenses and decrease its revenue).
Outlook Due to their complex nature, it can be years before
litigation and regulatory matters are resolved. The Company
may be unable to develop an estimate or range of loss where
matters are in early stages, there are significant factual or
legal issues to be resolved, damages are unspecified or
uncertain, or there is uncertainty as to a litigation class being
certified or the outcome of pending motions, appeals or
proceedings. For those litigation and regulatory matters where
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