BB&T 2015 Annual Report Download - page 22

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BB&T may be subject to more stringent capital requirements, which could diminish its ability to pay dividends or require BB&T to reduce its operations.
The Dodd-Frank Act requires federal banking agencies to establish more stringent risk-based capital requirements and leverage limits applicable to banks and
BHCs. The FRB approved final rules that established a new comprehensive capital framework for U.S. banking organizations and established a more
conservative definition of capital. These requirements, known as Basel III, became effective on January 1, 2015, and as a result, BB&T became subject to
enhanced minimum capital and leverage ratios. These requirements, and any other new regulations, including those that have been proposed but not yet
implemented as a result of the requirements established by the BCBS, could adversely affect BB&T’s ability to pay dividends, or could require BB&T to
limit certain business activities or to raise capital, which may adversely affect its results of operations or financial condition. With approximately $209.9
billion in assets at December 31, 2015, BB&T currently qualifies as a standardized approach banking organization under Basel III. Financial institutions with
greater than $250 billion in assets or $10 billion in foreign assets are considered advanced approaches banking organizations, which results in a more
complex calculation of RWA that includes an assessment of the impact of operational risk, among other changes. BB&T is preparing to comply with the
advanced approaches requirements and these more stringent requirements, or BB&T’s failure to properly comply with them, could materially and adversely
impact BB&T’s financial results and regulatory status. In addition, the costs associated with complying with more stringent capital requirements, such as the
requirement to formulate and submit capital plans based on pre-defined stress scenarios on an annual basis, could have a material adverse effect on BB&T.
See “Regulatory Considerations” for additional information regarding the capital requirements under the Dodd-Frank Act and Basel III.
BB&T is subject to extensive and expanding government regulation and supervision, which can lead to costly enforcement actions while increasing the cost
of doing business and limiting BB&T’s ability to generate revenue.
The financial services industry is facing more intense scrutiny from bank supervisors in the examination process and more aggressive enforcement of
regulations on both the federal and state levels, particularly with respect to mortgage- related practices and other consumer compliance matters, and
compliance with anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control efforts, and economic sanctions against certain foreign
countries and nationals. Federal banking law grants substantial enforcement powers to federal banking regulators. This enforcement authority includes,
among other things, the ability to assess significant civil or criminal monetary penalties, fines, or restitution; to issue cease and desist or removal orders; and
to initiate injunctive actions against banking organizations and institution-affiliated parties. These enforcement actions may be initiated for violations of
laws and regulations and unsafe or unsound practices. Failure to comply with these and other regulations, and supervisory expectations related thereto, may
result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on business. In addition, federal bank regulatory agencies are
required to consider the effectiveness of a financial institution’s anti-money laundering activities and other regulatory compliance matters when reviewing
bank mergers and BHC acquisitions and, consequently, non-compliance with the applicable regulations could materially impair BB&T’s ability to enter into
or complete mergers and acquisitions.
Differences in interpretation of tax laws and regulations and any potential resulting litigation may adversely impact BB&T’s financial statements.
Local, state or federal tax authorities may interpret tax laws and regulations differently than BB&T and challenge tax positions that BB&T has taken on its
tax returns. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in
treatment may result in payment of additional taxes, interest or penalties that could have a material adverse effect on BB&T’s results. For example, as
discussed in Note 12 “Income Taxes” in the “Notes to Consolidated Financial Statements,” during 2010, BB&T received an IRS statutory notice of
deficiency for tax years 2002-2007 asserting a liability for taxes, penalties and interest of approximately $892 million. Related developments resulted in a
$516 million charge during 2013. Potential developments in BB&T’s litigation or in similar cases could adversely affect BB&T’s financial position or results
of operations.
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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