BB&T 2009 Annual Report Download - page 34

“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 also may 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. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject
to certain limits. On November 12, 2009, the FDIC adopted a rule requiring banks to prepay three years’ worth of
premiums to replenish the depleted insurance fund. 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. 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, each of the Banks is 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. BB&T FSB is entitled to federal preemption under the Home Owners Loan Act and OTS
regulations of certain state laws.
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, the FDIC for Branch Bank and the
OTS for BB&T FSB, 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,” “Needs to Improve” or “Substantial Noncompliance.” This assessment is
reviewed for any bank that applies to merge or consolidate with or acquire the assets or assume the liabilities of
an insured depository institution, or to open or relocate a branch office. The CRA record of each subsidiary bank
of a financial holding company, such as BB&T, also is assessed by the Federal Reserve Board in connection with
any acquisition or merger application.
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