BB&T 2007 Annual Report Download - page 30

capitalized.” Federal law also requires the bank regulatory agencies to implement systems for “prompt corrective
action” for institutions that fail to meet minimum capital requirements within the five capital categories, with
progressively more severe restrictions on operations, management and capital distributions according to the
category in which an institution is placed. Failure to meet capital requirements may also cause an institution to be
directed to raise additional capital. Federal law also mandates that the agencies adopt safety and soundness
standards relating generally to operations and management, asset quality and executive compensation, and
authorizes administrative action against an institution that fails to meet such standards.
In addition to the “prompt corrective action” directives, failure to meet capital guidelines may subject a
banking organization to a variety of other enforcement remedies, including additional substantial restrictions on
its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the
appointment of a conservator or receiver.
Deposit Insurance Assessments
The deposits of the Banks are insured by the DIF of the FDIC up to the limits set forth under applicable law
and are subject to the deposit insurance premium assessments of the DIF. The FDIC imposes a risk-based
deposit premium assessment system, which was amended pursuant to the Federal Deposit Insurance Reform Act
of 2005 (the “Reform Act”). Under this system, as amended, the assessment rates for an insured depository
institution vary according to the level of risk incurred in its activities. To arrive at an assessment rate for a
banking institution, the FDIC places it in one of four risk categories determined by reference to its capital levels
and supervisory ratings. In addition, in the case of those institutions in the lowest risk category, the FDIC
further determines its assessment rate based on certain specified financial ratios or, if applicable, its long-term
debt ratings. As of January 1, 2007, assessments for the DIF could range from 5 to 43 basis points per $100 of
assessable deposits, depending on the insured institution’s risk category as described above. The assessment rate
schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. The FDIC has
published guidelines under the Reform Act on the adjustment of assessment rates for certain institutions. Under
the current system, premiums are assessed quarterly. The Reform Act also provides for a one-time premium
assessment credit for eligible insured depository institutions, including those institutions in existence and paying
deposit insurance premiums on December 31, 1996, or certain successors to any such institution. The assessment
credit is determined based on the eligible institution’s deposits at December 31, 1996 and is applied automatically
to reduce the institution’s quarterly premium assessments to the maximum extent allowed, until the credit is
exhausted. In addition, insured deposits have been required to pay a pro rata portion of the interest due on the
obligations issued by the Financing Corporation (“FICO”) to fund the closing and disposal of failed thrift
institutions by the Resolution Trust Corporation.
Consumer Protection Laws
In connection with their lending and leasing activities, the Banks are each subject to a number of federal and
state laws designed to protect borrowers and promote lending to various sectors of the economy and population.
These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act,
the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and their respective state law
counterparts.
Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a
financial institution must provide to its customers, at the inception of the customer relationship and annually
thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal
financial information. These provisions also provide that, except for certain limited exceptions, an institution may
not provide such personal information to unaffiliated third parties unless the institution discloses to the customer
that such information may be so provided and the customer is given the opportunity to opt out of such disclosure.
Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer
information of a financial nature by fraudulent or deceptive means.
The CRA requires the Banks’ primary federal bank regulatory agency, in this case the FDIC, to assess the
bank’s record in meeting the credit needs of the communities served by each Bank, including low- and moderate-
income neighborhoods and persons. Institutions are assigned one of four ratings: “Outstanding,” “Satisfactory,”
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