Regions Bank 2012 Annual Report Download - page 22

further in this section, many aspects of the Dodd-Frank Act are subject to further rulemaking and will take effect
over several years, making it difficult to anticipate the overall financial impact on Regions and its subsidiaries or
the financial services industry generally. In addition to the discussion in this section, see “Risk Factors—Recent
legislation regarding the financial services industry may have a significant adverse effect on our operations” for a
discussion of the potential impact legislative and regulatory reforms may have on our results of operations and
financial condition.
Financial Stability Oversight Council. The Dodd-Frank Act creates a new systemic risk oversight body,
the Financial Stability Oversight Council (“FSOC”) to coordinate the efforts of the primary U.S. financial
regulatory agencies (including the Federal Reserve, the FDIC and the SEC) in establishing regulations to address
systemic financial stability concerns. The Dodd-Frank Act directs the FSOC to make recommendations to the
Federal Reserve regarding supervisory requirements and prudential standards applicable to systemically
important financial institutions (often referred to as “SIFI,” which includes bank holding companies with over
$50 billion in assets, such as Regions), including capital, leverage, liquidity and risk-management requirements.
The Dodd-Frank Act mandates that the requirements applicable to systemically important financial institutions
be more stringent than those applicable to other financial companies. The Federal Reserve has discretionary
authority to establish additional prudential standards, on its own or at the FSOC’s recommendation. The Dodd-
Frank Act also requires the Federal Reserve to conduct annual analyses of such bank holding companies to
evaluate whether the companies have sufficient capital on a total consolidated basis necessary to absorb losses as
a result of adverse economic conditions.
Enhanced Supervision and Prudential Standards. In December 2011, the Federal Reserve introduced a
new proposal aimed at minimizing risks associated with “covered companies,” including U.S. bank holding
companies with consolidated assets of $50 billion or more and other financial companies designated by the
FSOC as systemically important (“Proposed SIFI Rules”). The Federal Reserve’s proposal includes risk-based
capital and leverage requirements, liquidity requirements, stress tests, single-counterparty credit limits and
overall risk management requirements, early remediation requirements and resolution planning and credit
exposure reporting. The proposed rules would address a wide, diverse array of regulatory areas, each of which is
highly complex. In some cases they would implement financial regulatory requirements being proposed for the
first time, and in others overlap with other regulatory reforms. The proposed rules also address the Dodd-Frank
Act’s early remediation requirements applicable to bank holding companies that have total consolidated assets of
$50 billion or more. The proposed remediation rules are modeled after the prompt corrective action regime,
described under “—Safety and Soundness Standards” below, but are designed to require action beginning in the
earlier stages of a company’s financial distress by mandating action on the basis of arranged triggers, including
capital and leverage, stress test results, liquidity, and risk management. Except as described in the second
paragraph under “Federal Reserve’s Comprehensive Capital Analysis and Review” below regarding stress
testing, the Proposed SIFI Rules have not become final as of February 2013. The full impact of the Proposed SIFI
Rules on Regions is being analyzed, but will not be known until the rules, and other regulatory initiatives that
overlap with these rules, are finalized and their combined impacts can be understood.
Federal Reserve’s Comprehensive Capital Analysis and Review. In November 2011, the Federal Reserve
published a final rule which requires U.S. bank holding companies with total consolidated assets of $50 billion or
more (such as Regions) to submit annual capital plans, along with related stress test requirements, to the Federal
Reserve for approval. The capital analysis and review process provided for in the rule is known as the
Comprehensive Capital Analysis and Review (“CCAR”). The purpose of the capital plan is to ensure that these
bank holding companies have robust, forward-looking capital planning processes that account for each
company’s unique risks and that permit continued operations during times of economic and financial stress. The
capital plans are required to be submitted on an annual basis. Such bank holding companies will also be required
to collect and report certain related data on a quarterly basis to allow the Federal Reserve to monitor the
companies’ progress against their annual capital plans. The comprehensive capital plans, which Regions prepares
using Basel I capital guidelines, include a view of capital adequacy under the stress test scenarios described
below. The effect of the rules is that, among other things, a covered bank holding company may not make a
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