U.S. Banking Regulatory Update - Chapters Site

1 Banking Regulatory Update February 2013 Change or Beware If we do not take change by the hand it will surely take us by the throat. Winston Churchill 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 2 Make Up of the Industry (2003 to 2012) Source: fdic . $100 million to $1B 4,244 Institutions ( ) 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

2 All rights reserved. NDPPS 111930 3 Top 10 banks control > Half of industry s assets $0 $5,000 $10,000 $15,000 2012 2006 2003 Combined Assets of All Others Combined Assets of Top 10 Banks 52% 40% 29% 71% 60% 48% Dollar figures in Trillions Source: SNL, used with permission 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 4 Net improving; Earnings under pressure (2ndQ, 2012) Source: fdic quarterly Banking profile , 2nd Q, 2012 used with permission 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

3 All rights reserved. NDPPS 111930 5 ROA (2ndQ, 2012) Source: fdic quarterly Banking profile , 2nd Q, 2012 used with permission 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 6 Problem institutions (2ndQ, 2012) Source: fdic quarterly Banking profile , 2nd Q, 2012 used with permission 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 All rights reserved. NDPPS 111930 7 Growth in branches slows; deposits increase Source: SNL Used with permission. 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 8 Preferred Banking method All age groups Source: ABA used with permission. 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

5 NDPPS 111930 9 Focus areas of Banks Regulation Basel II - III Durbin Amendment Volcker Cost Operational Efficiency Divesting non-core businesses Discretionary spend Growth Inorganic growth ( M&A) New product /market development Re-pricing Change The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty. Winston Churchill 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 116381 The New Regulatory Landscape & Impacts 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

6 All rights reserved. NDPPS 111930 12 Dodd-Frank Act Financial Regulatory Reform: Areas of Focus federal Bank Supervision Systemic Risk Systemically important ( SIFI ) designation Financial Stability Oversight Counsel and Office of federal Register oversight . Stress testing and living will requirements Financial Stability & Capital Requirements Liquidation authority Bank capital requirements Emergency stabilization Volcker Rule Proprietary trading restrictions Hedge fund and Private Equity fund restrictions Regulation of OTC Derivatives Swaps pushout rule Derivatives clearing and reporting requirements Other Areas of Reform Conflict minerals disclosure requirements Interest on business deposits Registration of Advisers SEC registration and exams Record keeping and reporting Private client disclosure Amendments to bank regulations Deposit insurance reforms Office of Thrift Supervision elimination

7 Consumer Protection & Mortgage Reform Broker/dealer and securities regulation Securitization risk retention Expanded mortgage documentation requirements Consumer Financial Protection Bureau 0 500 1,000 1,500 2,500 Number of Pages Dodd-Frank (2010): 2,319 pgs Gramm Leach Bliley (1999): 145 pgs Sarbanes Oxley (2002): 66 pgs Glass Steagall (1933): 37 pgs The Dodd-Frank Wall Street Reform and Consumer Protection Act ( The Dodd-Frank Act ) provided the most sweeping overhaul of the financial services industry and financial markets since the Great Depression Areas of Focus Major Financial Legislation 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

8 All rights reserved. NDPPS 111930 13 The Dodd-Frank Act The New Regulatory Landscape Regulatory reporting requirements can be expected to change further (increase) as the Regulatory structure changes. Banks insurance Securities Commodities/ Futures Consumers New Agencies Changing Merging Unchanged federal Reserve Board Office of Thrift Supervision Office of the Comptroller of the Currency federal Deposit insurance corporation Financial Stability Oversight Council Consumer Financial Protection Bureau State Bank Regulators State insurance Regulators federal insurance Office Security and Exchange Commission Financial Industry Regulatory Authority State Securities Regulators Commodity Futures Trading Commission Consumer Financial Protection Bureau Graphic updated/adapted from Financial Times article National Futures Assoc.

9 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 14 Impact on business and financial strategy Intensified Regulatory pressure & risks Strategic Risk Fee revenue from ancillary and core products & services Increased risk management & compliance costs 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

10 NDPPS 111930 15 Impact on infrastructure & operations Product innovation and marketing tactics Prioritization for operations & technology investment M&A due diligence 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 111930 16 Impact on behaviors & culture Reputation Risk Customer Experience vs. Consumer Compliance Risks from affiliates and third parties 2012 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.