Regions Bank 2012 Annual Report Download - page 123

treatment event” (as defined in the indenture related to the trust preferred securities), which allowed Regions to
redeem the trust preferred securities pursuant to the terms of such securities. Regions may, from time to time,
consider opportunistically retiring outstanding issued securities, including subordinated debt, trust preferred
securities and preferred shares in privately negotiated or open market transactions for cash or common shares.
Regulatory approval would be required for retirement of some instruments.
See the “Stockholders’ Equity” section for discussion of the Federal Reserve’s Comprehensive Capital
Analysis and Review.
COUNTERPARTY RISK
Regions manages and monitors its exposure to other financial institutions, also known as counterparty
exposure, on an ongoing basis. The objective is to ensure that Regions appropriately identifies and reacts to risks
associated with counterparties in a timely manner. This exposure may be direct or indirect and could create
financial, credit, legal, or reputational risk to the Company.
Counterparty exposure may result from a variety of transaction types and may include exposure to
commercial banks, savings and loans, insurance companies, broker/dealers, institutions that provide credit
enhancements, and foreign corporate debt issuers. Because transactions with a counterparty may be generated in
one or more departments, exposure limits are established for use by various areas of the Company including
treasury, investments group, capital markets, finance, the mortgage division, and other lines of business.
To manage counterparty risk, Regions has a centralized approach to approval, management and monitoring
of exposure. To that end, Regions has a dedicated counterparty credit group and credit officer, as well as a
documented counterparty credit policy. Exposures to counterparties are regularly aggregated across departments
and reported to senior management.
INTERNATIONAL RISK
Regions has minimal sovereign credit exposure. This includes an immaterial amount in government
securities issued by a single non-European sovereign, as well as a guarantee on a leveraged lease from a Western
European government agency. However, Regions does have country exposure, which is defined as the
aggregation of exposure with financial institutions, companies, or individuals in a given country outside of the
United States. The majority of these exposures are in the form of corporate bonds purchased for the bank’s
investment portfolio, derivative hedges (interest rate and foreign exchange), and leveraged lease guarantees. This
exposure is concentrated in highly-rated, Western European countries but not in those most severely affected by
the Eurozone turmoil.
In addition to Western Europe and Australia, Regions’ corporate securities include investments in
corporations domiciled in other countries in Eastern Europe and North America. Regions has other smaller
exposures in the form of trade confirmations, due from clearing accounts and loan participations with
counterparties domiciled in countries in other regions, such as Central and South America, Asia and the Middle
East/North Africa region.
At December 31, 2012, Regions’ international exposure was approximately $1.2 billion in total
outstandings. Approximately 69 percent of the total exposure relates to corporate bonds. Approximately
55 percent of the total exposure relates to highly-rated Western European entities.
Regions’ Counterparty Risk department is responsible for the setting of country limits and managing of the
outstanding country exposure for all departments of the bank as well as monitoring compliance of the
outstanding exposure to the established limits. Reports are sent to Counterparty Risk by the lines of business on a
monthly basis to demonstrate their compliance with their set limits. Counterparty Risk conducts a formal,
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