Voya 2014 Annual Report Download - page 78

standards, credit exposure requirements, resolution plan requirements, stress testing, management interlock
prohibitions, and additional fees and assessments. Designated Financial Companies may also be subject to
additional capital requirements for, and other restrictions on, proprietary trading and sponsorship of, and
investment in, hedge, private equity and other covered funds. The exact scope and consequences of these
standards and requirements are subject to ongoing rulemaking activity by various federal banking regulators and
therefore are currently unclear. However, this comprehensive system of prudential regulation, if applied to the
Company, would significantly impact the manner in which we operate and could materially and adversely impact
the profitability of one or more of our business lines or the level of capital required to support our activities. If
ING Group were deemed to “control” the Company, the FSOC may consider the Company together with ING
Group’s other operations in the United States for purposes of making this determination. Therefore, while we
believe it is unlikely that the Company, either on a standalone basis or together with ING Group’s other
operations in the United States, will ultimately receive this designation, there is a greater likelihood of such a
designation being made for as long as ING Group has a significant ownership interest in the Company.
In addition, the Dodd-Frank Act contains numerous other provisions, some of which may have an impact on
us. These include:
• The FSOC may recommend that state insurance regulators or other regulators apply new or heightened
standards and safeguards for activities or practices we and other insurers or other financial services
companies engage in if the FSOC determines that those activities or practices could create or increase
the risk that significant liquidity, credit or other problems spread among financial companies. We
cannot predict whether any such recommendations will be made or their effect on our business, results
of operations, cash flows or financial condition.
• The Dodd-Frank Act creates a new framework for regulating over-the-counter (“OTC”) derivatives,
which may increase the costs of hedging and other permitted derivatives trading activity undertaken by
us. Under the new regulatory regime and subject to certain exceptions, certain standardized OTC
interest rate and credit derivatives must now be cleared through a centralized clearinghouse and
executed on a centralized exchange or execution facility, and the CFTC and the SEC may designate
additional types of OTC derivatives for mandatory clearing and trade execution requirements in the
future. The Dodd-Frank Act also establishes new regulatory authority for the SEC and the CFTC over
OTC derivatives and parties to OTC derivative transactions including “swap dealers,” “security-based
swap dealers,” “major swap participants,” “major security-based swap participants” as well as end
users of derivatives. In addition to mandatory central clearing and trade execution of certain OTC
derivatives, such market participants are or will soon be subject to significant regulatory requirements
including registration, reporting and recordkeeping, capital and margin requirements. The transition to
central clearing and the new regulatory regime governing OTC derivatives (especially margin
requirements for non-cleared derivatives) presents potentially significant business, liquidity and
operational risk for us which could materially and adversely impact both the cost and our ability to
effectively hedge various risks, including equity and interest rate market risk features within many of
our insurance and annuity products. In addition, inconsistencies between the Dodd-Frank Act regime
and parallel regimes in other jurisdictions, such as the EU, may inhibit our ability to access market
liquidity in those other jurisdictions.
• The CFTC and SEC jointly adopted final rules, which (subject to certain exceptions) became effective
on October 12, 2012, to further define the terms “swap” and “security-based swap,” which clarify that
certain products (i) issued by entities subject to supervision by the insurance commissioner (or similar
official or agency) of any state or by the United States or an agency or instrumentality thereof (the
“Provider Test”) and (ii) regulated as insurance or otherwise enumerated by rule are excluded from the
definition of a “swap” and “security-based swap.” In addition, any insurance contracts which might
otherwise be included within the definition of “swap” or “security-based swap” which were issued on
or before the effective date of the rules will be grandfathered and thereby excluded from the
definitions, as long as the issuer satisfies the Provider Test. However, the rulemaking does not extend
the exemption to certain products issued by insurance companies including GICs, synthetic GICs,
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