EconomicImpactRegulatoryReform by fanzhongqing


									Context: The safety and soundness of our financial system undoubtedly has improved as the result of recent changes made by Congress, supervisors, and financial institutions themselves. In particular, risk has been reduced, capital
and liquidity have improved, and failed firms can be resolved without imposing loss on taxpayers. These are positive developments for the U.S. and the future of financial services and should be applauded. However as hundreds of
new rules are written – both here and abroad – it is critically important for the sake of our economy, consumers, and the competitiveness of the financial services industry that the cumulative weight of new rules is understood. The
Financial Services Roundtable has begun collecting independent reports, testimonies, speeches, and statements that provide a window into the potential weight of these new rules.

                                                                                            CUMULATIVE WEIGHT OF REGULATORY REFORM

                                                                                                                  GENERAL IMPACT

Topic                              Source                                Title/Date                                         Key Takeaways
Economic Impact                    Institute for International Finance   Interim Report on the Cumulative Impact on         For the G3 (US, Euro Area, Japan), the full implementation of regulatory reform will subtract an annual average of 0.6
                                                                         the Global Economy of Proposed Changes in          percentage points from the path of real GDP growth over the five year period 2011-15, and an average of about 0.3
                                                                         the Banking Regulatory Framework. June             percentage points from the growth path over the full ten year period, 2011-2020. For the U.S., the path of real GDP
                                                                         2010                                               would be lower than in a scenario of no regulatory change, with the negative impact rising fastest in the next five years
                                                                                                                            when the economy is struggling to resume a solid growth against the headwinds of a fiscal policy reversal. By 2015, the
                                                                                                                            downward deviation would be about 2.6%. The loss in jobs in the regulatory change scenario is about 4.6 million by
                                                                                                                            2015. This slower recover in employment and output can be viewed as a significant price to pay for a more heavily-
                                                                                                                            regulated and arguably more stable system.

Economic Impact                    The Economist                         Too Big Not to Fail: Flaws in the confused,        It is the risk that they and other parts of the Dodd-Frank apparatus will smother financial institutions in so much red tape
                                                                         bloated law passed in the aftermath of America’s   that innovation is stifled and America’s economy suffers.
                                                                         financial crisis become ever more apparent
                                                                         February 2012.

Economic Impact                    Institute for International Finance   The Cumulative Impact on the Global                In the interim report, the downward deviation of real GDP in U.S. was estimated at about 2.6%. However the final report
                                                                         Economy of Changes in the Financial                has downward adjusted the estimate by 0.1%, leading to a real GDP decrease of 2.7% by 2015 in U.S.. Compared with
                                                                         Regulatory Framework. September 2011               4.6 million in job loss through 2015 in U.S., the final report has updated the number to 2.9 million.
                                                                                                                            A big difference in the employment projection is that regulation reforms could actually increase employment by 0.9
                                                                                                                            million through 2020 instead of a job deduction of 4.9 million from the interim report. From the previous report, the
                                                                                                                            changes in funding costs resulting from regulatory reform would lead to an increase in bank lending rates of about 193
                                                                                                                            basis points by 2014.The final report has put together more specific data on bank lending activities in U.S.. First, it
                                                                                                                            expected an increase in capital needs by $ 1.3 trillion and long-term debt issuance by $ 0.3 trillion by 2015 due to stricter
                                                                                                                            regulations. In response to higher funding demands, the bank lending rates would increase by about 364 bps over the
                                                                                                                            next five years which would directly lead to a reduction of real GDP of 3.2%, or about 0.7% per year. Consequently, it
                                                                                                                            estimated that there would be 7.5 million few jobs being created over the next five years.

     Financial Stability Industry Council                                                                               As of 5/16/2012                                                                                                         Page 1
Economic Impact                   Dr. Douglas Holtz-Eakin,         Testimony at the House Financial Services           Financial regulation imposes budgetary costs on the taxpayer. It also imposes direct compliance costs and its distortions
                                  President, American Action Forum Hearing: “The Costs of Implementing the             induce economic costs in the form of reduced capital investment, inferior risk-sharing, and lost competitiveness. Dodd-
                                                                   Dodd-Frank Act: Budgetary and Economic.”            Frank will impose substantial costs of each type.
                                                                   March 30, 2011                                      Budgetary costs are the least difficult to estimate, and likely the smallest cost associated with Dodd-Frank. Compliance
                                                                                                                       costs are an important burden on the affected firms and industries. Past episodes such as the passage of the Sarbanes-
                                                                                                                       Oxley legislation suggest that these can be substantially larger than anticipated. SOX compliance for one provision of
                                                                                                                       the Act was estimated at under $100,000; the reality for most firms is easily 10 to 40 times greater. The economic
                                                                                                                       consequences of Dodd-Frank will be to reduce investment in the U.S. The total costs to date are $836.6 million.
                                                                                                                       Standard & Poors estimates that Dodd-Frank would result in a $22 billion reduction in aggregate pre- tax earnings
                                                                                                                       among large banks. International Swaps Dealers Association; $1 trillion in capital and liquidity requirements.

Economic Impact                   Institute for International Finance   Net Cumulative Economic Impact of              Most assessments of the cost of a crisis seem to dramatically overstate the extent to which that crisis can be attributed to
                                                                        Banking Sector Regulation: Some new            problems originating in the banking sector. In most recent crisis used in empirical studies – the banking sector is the
                                                                        Perspectives. October 2010                     casualty of failings elsewhere in the economy- generally in the macroeconomic policy making framework.

Economic Impact                   Professor Hal S. Scott, Director of Testimony at the House Financial Services        Studies estimate the impact on global GDP of a 1 percentage point increase in bank common equity to have a peak
                                  the Committee on Capital Markets Hearing: "Financial Regulatory Reform: The          negative effect of up to 1.1% of GDP, or up to $748 billion by 2019. The cumulative effects of the various provisions in
                                  Regulation, Nomura Professor and International Context." June 2011                   Basel III could lead to a decline in U.S. GDP alone of up to $951 billion over the period of 2011 to 2015 according to the
                                  Director of the Program on                                                           IIF. But as Chairman Bernanke admits, we really do not know the impact; it might be much worse.
                                  International Financial Systems at
                                  Harvard Law

Economic Impact                   Jeffrey M. Lacker, President,         Testimony at the House Financial Services      Researchers at the Federal Reserve Bank of Richmond have estimated, based on conservative assumptions, that the
                                  Federal Reserve Bank of               Hearing: “The Costs of Implementing the        implicit safety net covered as much as 40 percent of all financial sector liabilities by the end of 2009. When combined
                                  Richmond                              Dodd-Frank Act: Budgetary and Economic.”       with the explicit protection in place for depository institutions and other firms, the broader federal financial safety net
                                                                        March 30, 2011                                 now covers 62 percent of the financial sector, compared to about 45 percent a decade earlier.

Economic Impact                   Douglas W. Elmendorf, Director,       Testimony Before the Subcommittee on           CBO estimated that, over the 2010–2020 period, the Dodd-Frank Act would increase both revenues and direct (or
                                  Congressional Budget Office           Oversight and Investigations Committee on      mandatory) spending—by $13.4 billion and $10.2 billion, respectively. The revenues would stem primarily from fees
                                                                        Financial Services: "Review of CBO's Cost      assessed on various financial institutions and market participants. Certain provisions of the act were estimated to increase
                                                                        Estimate for the Dodd-Frank Wall Street        direct spending by $37.8 billion over the 10-year period; most of those costs, $26.3 billion, would result from a new
                                                                        Reform and Consumer Protection Act,"           program created to resolve insolvent or soon-to-be insolvent financial entities, which would be financed through an
                                                                        March 30, 2011                                 Orderly Liquidation Fund (OLF). Other provisions of the act would reduce direct spending by $27.6 billion over that
                                                                                                                       period by decreasing authority for the Troubled Asset Relief Program (TARP) and making changes to federal deposit
                                                                                                                       insurance program. In addition to those changes in direct spending and revenues, CBO estimates that the Dodd-Frank
                                                                                                                       Act will lead to an increase of $2.6 billion in discretionary spending over the five-year period ending in fiscal year 2015,
                                                                                                                       assuming that the Congress provides the necessary appropriations in the future.

    Financial Stability Industry Council                                                                            As of 5/16/2012                                                                                                         Page 2
Economic Impact                   Dr. James J. Angel, Associate     Testimony at the House Financial Services      Cost of Sarbanes-Oxley as an example of regulation gone wrong: One study by Foley and Lardner found that the average
                                  Professor of Finance, McDonough   Hearing: “The Costs of Implementing the        cost of being public for a firm with less than $1 billion in revenue jumped from $1.05 million before Sarbanes-Oxley to
                                  School of Business, Georgetown    Dodd-Frank Act: Budgetary and Economic.”       $2.88 million by 2005 – a 171% increase.
                                  University                        March 30, 2011                                 There are the indirect costs stemming from the impact on the economy. I will focus my remarks on these indirect costs,
                                                                                                                   as they can be the largest costs that matter the most. However, the CBO report to Congress during the deliberations over
                                                                                                                   Dodd-Frank did not even attempt to address the indirect costs or impacts on our economy, but focused solely on the near-
                                                                                                                   term impact on the federal budget.

Economic Impact                   American Enterprise Institute     The Dodd Frank Act: Creative Destruction,      Where financial firms once focused on beating their competitors, they will now focus on currying favor with their
                                                                    Destroyed. August 2010                         regulator, which will have the power to control their every move. What may ultimately emerge is a partnership between
                                                                                                                   the largest financial firms and the Federal Reserve--a partnership in which the Fed protects them from failure and
                                                                                                                   excessive competition and they in turn curb their competitive instincts to carry out the government's policies and

Economic Impact                   Harvard Business Law Review       In Dodd-Frank’s Shadow: The Declining          The perceived unfairness and unpredictability of the U.S. legal system have driven companies away from our public
                                                                    Competitiveness of U.S. Public Equity          exchanges; 46% of executives surveyed believed the U.K. had more predictable legal outcomes compared with 16% for
                                                                    Markets. March 2011                            the U.S.

Economic Impact                   Brian Moynihan, President and     Bank of America's CEO Says Capital Rules       If the capital goes too high it is going to cause us to constrict. Every 100 basis points of capital for us--under the new
                                  CEO, Bank of America              May Discourage Lending. June 2011              regulations--is about $18 billion of capital, and if you multiply that times 10, 12, or 15 that's how much we have to
                                                                                                                   optimize the balance sheet. So the question is that trade off. [Banks cannot still loan and just accept a lower return on
                                                                                                                   equity] because the equity that is meant to provide the buffer can't be put to use or else you need more of it.

Economic Impact                   Mr. John Walsh, Acting            Testimony at the House Financial Services  Failure to consider and balance the combined impact of all of the changes will have real consequences to the extent that
                                  Comptroller of the Currency       Hearing: "Financial Regulatory Reform: The constraints on liquidity translate into constraints on bank lending and the availability of credit within the economy.
                                                                    International Context." June 2011

Economic Impact                   Myron Scholes, Nobel prize        Myron Scholes Warns Against Excessive          Myron Scholes, a Nobel Prize-winning quantitative analyst, said
                                  winner                            Capital Requirements. June 2011                "if you restrict or require more capital of banks, what will happen is that they have to wait until the deviations [in price]
                                                                                                                   get larger before they intermediate, because they have to make a return on the capital they are employing. As
                                                                                                                   intermediary services stop, markets then become more chaotic. "

Economic Impact                   Anonymous, Former Senior Fed      Regulators Risking New Depression. June        By insisting on higher and higher levels of required capital, regulators risk making precisely the same mistake as their
                                  Official                          2011                                           predecessors at a very similar juncture in the current economic recovery -- with potentially disastrous consequences for
                                                                                                                   the nation.

Economic Impact                   SIFMA                             SIFMA Roundtable of Economists Sees            Over 75 percent of survey respondents expected a negative impact on credit availability and nearly 60 percent expected a
                                                                    Economic Growth Steady at Subpar Rate,         negative impact on the cost of credit for households. The forecast for impact on the business sector was only slightly less
                                                                    Deficit Reducation Debate Continues for        negative, with 65 percent and 53 percent predicting a negative impact on the availability of credit and cost of credit,
                                                                    2011, 2012. July 2011                          respectively.

Economic Impact                   Committee on Capital Markets      The Pace of Rulemaking Under the Dodd-         The current rulemaking process is sacrificing quality and fairness for apparent speed, risking lengthy court challenges
                                  Regulation                        Frank Act: Letter to Congress. December        and poor rules that will damage our financial system and hinder economic recovery . . . Rather than using a prudent
                                                                    2010                                           deliberative process, sweeping reforms are being quickly pushed forward without providing adequate time for
                                                                                                                   meaningful fact-finding or dialogue.

    Financial Stability Industry Council                                                                        As of 5/16/2012                                                                                                          Page 3
Economic Impact                    House Financial Services         One Year Later: The Consequences of the          Operating the Consumer Financial Protection Bureau (CFPB), a brand new agency created by the Dodd-Frank Act, will
                                   Committee                        Dodd-Frank Act. Authored by Chairman             cost $329,045,000 for 2012 alone. This amounts to all of the income and payroll taxes paid by 26,000 average American
                                                                    Spencer Bachus and Vice-Chairman Jeb             workers. That means 26,000 Americans will work all year to offset the cost of this new government bureaucracy
                                                                    Hensarling. July 2011.

Economic Impact                    Eugene A. Ludwig, CEO,           Testimony at the U.S. Senate Banking             In implementing the Dodd-Frank Act, it is important to emphasize that the Act is sufficiently comprehensive that each
                                   Promontory Financial Group and   Committee. “Debt Financing in the                rulemaking should be evaluated with the recognition that the cumulative impact of the entirety of the Dodd-Frank
                                   Former Comptroller of the        Domestic Financial Sector.” August 2011          Act reforms will have an immense, and not entirely predictable, impact.. . . [DFA could have] a deleterious drag on
                                   Currency                                                                          capital formation and meaningful job opportunities for our people. . . Like any strong medicine, if applied incorrectly or
                                                                                                                     excessively, the Dodd-Frank Act can produce more harm than good.

Economic Impact                    Todd Zywicki, Senior Scholar,    New York Times, September 2011                   credit is the lifeblood of the economy, and that Dodd-Frank was designed to decrease access to credit. Dodd-Frank is the
                                   Mercatus Center, George Mason                                                     thing that is most harming the economy right now. Big business can deal with regulatory uncertainty, but it makes small
                                   University                                                                        businesses reluctant to take on risk and expand their operations

Economic Impact                    Javelin Strategy & Research study Regulation Fuels 21% Surge in Checking          Average consumer pays about $7.72 in monthly and automated teller machine fees, a jump of about 21% from 2006
                                                                     Fees February 2012.

Economic Impact                    American Action Forum            American Action Forum on Regulation. March,      Current projected annual costs of Dodd-Frank requirements: $7,052,500,000. Projected number of new personnel
                                                                    2012.                                            required to comply with Dodd-Frank: 26,447

Economic Impact                    Ignacio Urrabazo, President of   Testimony before the Subcommittee on Financial Consumers and small businesses are impacted in negative ways through the Dodd-Frank Act. Such as: higher costs for
                                   Commerce Bank                    Institutions and Consumer Credit Committee on financial products or limited products or limited credit availability at a higher cost. At some banks, certain types of
                                                                    Financial Services, March 14, 2012.            credit will be completely eliminated and access to credit will be denied.

Economic Impact                    IHS study                        The Volcker Rule: Impact assesment on the U.S.   The ensuing economic impacts on the segments examined in the report could result in up to 200,000 fewer jobs and $34
                                                                    energy industry and economy. March, 2012.        billion (2005 dollars) less in U.S. GDP on an annual basis over the 2012-2016 period

Industry Costs                     Rich Riese, Senior Vice President, Topic A: Compliance--The Growth Side of        The Bureau of Labor Statistics’ Occupational Handbook projected that between 2008 and 2010, compliance officer jobs
                                   American Banker's Association,     Banking? June 2011                             would grow at a faster rate -- by at least 20 percent -- than overall job growth.
                                   Center for Regulatory Compliance

     Financial Stability Industry Council                                                                         As of 5/16/2012                                                                                                      Page 4
Industry Costs                     House Financial Services            One Year Later: The Consequences of the        A survey of the Federal Register shows that complying with these new rules will require an estimated 2,260,631 labor
                                   Committee                           Dodd-Frank Act. Authored by Chairman           hours every year. To put this number in perspective, to meet the burden of only 10% of the new rules required by the
                                                                       Spencer Bachus and Vice-Chairman Jeb           Dodd-Frank Act, it will take 56,516 work weeks devoted solely to this administrative burden, or more than 1,100 work
                                                                       Hensarling. July 2011.                         years. If 1,000 Americans worked full time all year, every year, with no vacations or holidays, they would still be unable
                                                                                                                      to complete all the work that the rules require.

Industry Costs                     Mr. Barry Zubrow, Executive         Testimony at the House Financial Services  At any given time, we at JPMorgan Chase have 75-135 on-site, full-time examiners from the OCC, Federal Reserve and
                                   Vice President and Chief Risk       Hearing: "Financial Regulatory Reform: The FDIC; the U.K. FSA and other regulators have still more examiners overseeing our overseas operations. We underwent
                                   Officer, JPMorgan Chase & Co.       International Context." June 2011          218 examinations in 2010, and will see more this year. It is difficult to overstate the increase in supervisory oversight for
                                                                                                                  large financial firms.

Industry Costs                     Tim Ryan, President and CEO,        Testimony at the House Financial Services  Excessive capital charges make it more expensive for banks to lend money or provide liquidity to U.S. businesses. The
                                   Securities Industry and Financial   Hearing: "Financial Regulatory Reform: The result inevitably will be higher cost of credit and less credit and less funding available.
                                   Markets Association                 International Context." June 2011

Industry Costs                     The Financial Services Roundtable Hourly Analysis for Three of the Dodd-           In the first year these three rules (capital plans, stress tests and resolution plans) are implemented, the industry will need
                                                                     Frank Act Rulemakings. July 2011                 to spend 2,249,884 hours to comply with regulations. The estimated annual cost for the industry in the second year of
                                                                                                                      these regulations and beyond is 759,604 hours. These full-time employees may be new hires or diverted from other areas
                                                                                                                      of the organization. If we estimate that these employees earn $75,000 annually, this will impose an industry-wide annual
                                                                                                                      cost of $84,375,000.

Industry Costs                     Thompson Reuters                    Banks Preparing for (and Fearing)              As regulators hammer out dozens of new rules for the $600 trillion [derivatives] market, the banking industry is
                                                                       Derivatives Rules. July 2011                   collectively spending billions of dollars to comply with the overhaul.

Industry Costs                     Government Accountability Office DODD-FRANK ACT: Eleven Agencies'                  New funding resources related to Dodd-Frank responsibilities during the years 2011–2012 ranged from a low of $0 for
                                                                    Estimates of Resources for Implementing           FTC to a high of around $329 million for CFPB. Funding resources to implement the Dodd-Frank Act accounted for at
                                                                    Regulatory Reform. July 2011                      least 25 percent of the agency’s total budget increase at 9 of the 11 agencies in the most recent year for which data were
                                                                                                                      available… Agencies reported that most of the costs related to implementing the provisions will be recurring.

Industry Costs                     Javelin Strategy & Research study Regulation Fuels 21% Surge in Checking           The regulations that restrict bank revenue are costing the industry $12.2 billion a year
                                                                     Fees February 2012.

Industry Costs                     Congressman Neugebauer              Congressman Neugebauer Responds to Chairman “Took 20 million man hours to build the Panama Canal and we seemed to have gotten much better use from the panama
                                                                       Bernanke's Testimony on the State of the    canal than we are with 22 million man hours only 1/3 of the way through major legislation” There are 400 rules required
                                                                       Economy. March 2012                         in Dodd-Frank – only 140 have been completed.

Industry Costs                     Kathleen L. Casey, Commissioner, Speech by SEC Commissioner: "The           In addition, the breadth of Dodd-Frank makes it increasingly important that policy makers stay mindful of the costs and
                                   Securities and Exchange          Regulatory Implementation and Implications effects that the regulation in its totality will have on our markets. The costs of Dodd-Frank will be enormous, and we will
                                   Commission                       of Dodd-Frank." January 2011.              have no idea of the actual total costs for years to come. Given prior experience, such as the original estimates about the
                                                                                                               cost of S-Ox, those actual costs will prove substantially more significant than legislators and regulators predicted.

     Financial Stability Industry Council                                                                          As of 5/16/2012                                                                                                         Page 5
Industry Costs                     Lester Parker,                        The Testimony before the Subcommittee on        Direct compliance costs have increased to over 240% in that last five years – far exceeding the growth of the bank, its
                                   President/CEO/Chairman of             Financial Institutions and Consumer Credit      loans, investments and deposits.
                                   United Bank of El Paso del Norte      Committee on Financial Services, March 14,

Industry Impact                    Morgan Stanley, Oliver Wyman          The Future of Capital Markets Infrastructure Regulatory uncertainty remains the critical risk. The pace of implementation could cause some disruption to trading, and
                                                                         (PDF). February 2011                         sharp hikes in capital requirements (as much as +$2 trillion, we estimate) could have the unintended consequence of
                                                                                                                      reducing market liquidity.
Industry Impact                    Institute for International Finance   “Regulatory Reform Increases Cost of Bank The cost of debt and equity is high, and increasing.
                                                                         Funding” (PDF). March 2011

Industry Impact                    Standard & Poors Report               What Financial Reform Could Cost The            We estimate that the effects of Dodd-Frank will likely lead to a reduction in aggregate pretax earnings at the eight large,
                                                                         Largest U.S. Banks. November 2010               complex U.S. banks by roughly $19.5 billion to $22.0 billion annually before offsets, based on our projections for 2010
                                                                                                                         business activity. This loss represents roughly 18% to 21% of our forecast of 2010 complex-bank adjusted pretax
                                                                                                                         We also estimate that the effects of the law will likely reduce pretax return on equity (ROE) at these banks by up to 270
                                                                                                                         basis points (bps) and pretax margins by up to 450 bps if applied against 2010 projected adjusted earnings. The Credit
                                                                                                                         Card Accountability Responsibility and Disclosure Act of 2009 and Regulation E, which the Board of Governors of the
                                                                                                                         Federal Reserve System issued pursuant to the Electronic Funds Transfer Act, will likely add additional headwinds in the
                                                                                                                         form of operating costs, reducing large, complex U.S. banks' adjusted pretax earnings by roughly $8.7 billion per year, or
                                                                                                                         about 8.1% of our forecasted 2010 complex-bank adjusted pretax earnings.

Industry Impact                    Albert C. Kelly Jr., American         Testimony at the House Financial Services       Historically, the cost of regulatory compliance as a share of operating expenses is two and a half times greater for small
                                   Bankers Association                   Hearing: "The Effect of Dodd-Frank on           banks than for large banks.
                                                                         Small Financial Institutions and Small
                                                                         Businesses.” March 2, 2011

Industry Impact                    Professor Hal S. Scott, Director of Testimony at the House Financial Services   Goldman Sachs has been forced to dismantle much of its proprietary trading operation, which analysts estimate will
                                   the Committee on Capital Markets Hearing: "Financial Regulatory Reform: The     erase about $3.7 billion in revenue and $1.5 billion in profit annually—over 50% of revenues and 15% of earnings per
                                   Regulation, Nomura Professor and International Context." June 2011              share. The same is true for Morgan Stanley, which is expected to take a 13% earnings per share hit. Citigroup will have
                                   Director of the Program on                                                      to divest its interest in various hedge funds, such as its Mortgage/Credit Opportunity Fund, which climbed 16% in the
                                   International Financial Systems at                                              first four months of 2011, almost doubling its pace last year. About 90% of the $395 million invested in the fund is the
                                   Harvard Law                                                                     bank’s own capital. None of these changes have been made by
                                                                                                                   foreign competitors.
Industry Impact                    Wall Street Journal                   Liz Rappaport Reports: "Goldman Bets Less The weak performance and tentative talk by what usually is Wall Street's mightiest firm showed how Goldman and rival
                                                                         and Takes Hit." July 2011                 firms are struggling to make money in the wake of the crisis. With increasing regulation, financial shakiness in Europe
                                                                                                                   and fiscal uncertainty in the U.S., Wall Street's office towers are now filled with risk managers, cost accountants and
                                                                                                                   capital allocators rather than the superhero-like traders of decades past

Industry Impact                    John Walsh, Acting Comptroller        Warning on Bank Rules Reform. June 2011         John Walsh, a top US bank regulator said: 'My view is that we are in danger of trying to squeeze too much risk and
                                   of the Currency                                                                       complexity out of banking as we institute reforms to address problems and abuses stemming from the last crisis.’

     Financial Stability Industry Council                                                                             As of 5/16/2012                                                                                                       Page 6
Industry Impact                    House Financial Services              One Year Later: The Consequences of the         Leaders of Community Banks go on the record concerning Dodd-Frank:Greg Ohlendorf, President of First Community
                                   Committee                             Dodd-Frank Act. Authored by Chairman            Bank and Trust: “What we have to understand is we’re already overburdened with regulation. We have significant
                                                                         Spencer Bachus and Vice-Chairman Jeb            numbers of regs that we need to comply with today, and it seems like just one more isn’t going to change the deck a
                                                                         Hensarling. July 2011.                          whole lot, but the consistent piling on of additional regulation is very, very stunning. It’s punishing.”
                                                                                                                         Jim MacPhee, CEO of Kalamazoo County State Bank (Michigan): "We weren't part of the subprime (mortgage)
                                                                                                                         meltdown. Why throw more regulations at us?"
                                                                                                                         Leslie Andersen, president of Nebraska's Bank of Bennington: “Big banks have whole departments that focus on
                                                                                                                         compliance. Small banks can't afford to do that."
                                                                                                                         Tommy Whittaker, president of The Farmers Bank (Tennessee): "The cumulative burden of hundreds of new or revised
                                                                                                                         regulations may be a weight too great for many smaller banks to bear.”
                                                                                                                         Albert Kelly, Jr, CEO, SpiritBank: “This new bureaucracy[the Consumer Financial Protection Bureau]--expected to hire
                                                                                                                         over 1,200 new staff--will certainly impose new obligations on community banks--banks that had nothing to do with the
                                                                                                                         financial crisis and already have a long history of serving consumers fairly in a competitive environment. Thus, the new
Industry Impact                    Mary Schapiro, Chairman,              Jean Eaglesham Reports: "Atlas Shrugged.        [Pressures caused by Dodd-Frank will] affect our ability to police Wall Street effectively. . . [After the bill was signed
                                   Securities and Exchange               Will Regulators?" July 2011                     into law, the SEC] workload multiplied several times over.

Industry Impact                    Ignacio Urrabazo, President of Commerce Bank before the Subcommittee on Financial Community banks will be destroyed across the country as regulators create regulations on top of existing regulations.
                                                                        Institutions and Consumer Credit Committee on
                                                                        Financial Services, March 14, 2012.

Indusy Impact                      Ignacio Urrabazo, President of        Testimony before the Subcommittee on Financial In 1992 there were 1,193 banks in Texas – now there are 594; 50% less. “I assume in another decade, will be down
                                   Commerce Bank                         Institutions and Consumer Credit Committee on another 50% at 300 banks in Texas.”
                                                                         Financial Services, March 14, 2012.

Small Business Impact              U.S. Chamber of Commerce              House Financial Services Hearing: "The          There are more than 27 million small businesses in America.
                                                                         Effect of Dodd-Frank on Small Financial         Very small firms with fewer than 20 employees annually spend 45% more per employee than larger firms to comply with
                                                                         Institutions and Small Businesses.” March 2,    federal regulations. Small businesses have generated 64% of net new jobs over the past 15 years, and hire 40% of high-
                                                                         2011                                            tech workers. This proportion of small business job creation is even higher in the early stages of an economic
                                                                                                                         recovery.According to research conducted by the SBA’s Office of Advocacy, 60% used traditional types of loans, such as
                                                                                                                         credit lines, mortgage loans, and others. In 2009, about 77% of all small businesses used at least one credit card.

Small Business Impact              Mr. John M. Schaible, Chairman,       House Financial Services Hearing: "The       To make matters worse, Dodd-Frank is specifically focused on financial services, the capital formation engine of the
                                   Federal Atlas Holdings                Effect of Dodd-Frank on Small Financial      country. The uncertainty created by the Act is potentially toxic to any financial services start-up, in that it affects the
                                                                         Institutions and Small Businesses”, March 2, ability of small and early stage companies to secure necessary capital.

Small Business Impact                                               Interim Report on the Cumulative Impact on
                                   Institute for International Finance                                                    High dependency on banks of small and medium sized businesses, which typically create 70% of new jobs, presents
                                                                    the Global Economy of Proposed Changes in            another key issue.
                                                                    the Banking Regulatory Framework. June
Small Business Impact              Andrew Furgatch, Chairman of     Testimony at House Subcommittee on                   Results from a recent PCI/Ward Group survey on the cost of regulatory and corporate compliance found that total
                                   the Board, Magna Carta Insurance Insurance, Housing and Community                     compliance expenses grew almost 18 percent from 2008 to 2010. Smaller companies continue to face the most
                                   Companies                        Opportunity, "Policy Implications for U.S.           significant challenges due to increased regulatory requirements--from 2008 to 2010, the cost of compliance grew 36
                                                                    Consumers, Businesses and Jobs." July 2011           percent for small companies and 14 percent for large companies.

Small Business Impact              Paul Merski, Chief Economist at       The Wall Street Journal, August 2011.           The No. 1 complaint that we hear from community bankers is that they feel that regulators have gone one step too far
                                   the Independent Community                                                             and are choking off lending.
Deficit Impact                     Government Accountability Office Costs of DFA Implementation (PDF)                    Federal agencies prepare to spend an increasing amount of their resources in accordance with the Dodd-Frank Act. The
                                                                                                                         Office of the Comptroller of the Currency has submitted a 2012 budget request for $1,040,000, with 22.6% of that being
                                                                                                                         utilized for Dodd-Frank resources.

     Financial Stability Industry Council                                                                             As of 5/16/2012                                                                                                        Page 7
International                     Stephen O'Connor, Managing          Testimony at the House Financial Services  There are large and growing differences in the pace and scope of regulatory reform efforts in the U.S. and other
Competitiveness                   Director, Morgan Stanley            Hearing: "Financial Regulatory Reform: The jurisdictions. They put the U.S. financial markets at a disadvantage by driving up costs and reducing liquidity. And they
                                                                      International Context." June 2011          do so without demonstrating any clear benefit to equal or outweigh the considerable costs they impose...Disadvantaging
                                                                                                                 foreign institutions and U.S. subsidiaries of such [competitive] institutions, through divergent capital requirements or
                                                                                                                 otherwise, discourages foreign investment in U.S. subsidiaries, which leads to fewer jobs and to less competition within
                                                                                                                 our shores....Although the US remains one of the most dynamic, innovative marketplaces in the world, we note that
                                                                                                                 transaction volume in London already exceeds that in New York. We also note that the five largest US-based dealers
                                                                                                                 reported a notional amount outstanding equal to only 37% of the total notional amount for interest rate, credit, and equity
                                                                                                                 derivatives globally.

International                     Tim Ryan, President and CEO,        Testimony at the House Financial Services  If implemented in a way that is overly restrictive for market making, hedging, the Volcker Rule could harm liquidity in
Competitiveness                   Securities Industry and Financial   Hearing: "Financial Regulatory Reform: The the U.S. market, constrain capital formation, restrict credit availability to the consumer and business, and thus,
                                  Markets Association                 International Context." June 2011          undermine the nation‘s fragile recovery. Further, it could hasten further loss of U.S. market share in debt and equity
                                                                                                                 issuance to other nations since issuers and investors demand liquidity as a function and preference of markets in which
                                                                                                                 they issue and list.
International                     Mr. Barry Zubrow, Executive         Testimony at the House Financial Services  None of the world’s five largest banks is a U.S. bank. U.S. banks represent 24 percent of the market share of the 50
Competitiveness                   Vice President and Chief Risk       Hearing: "Financial Regulatory Reform: The largest global banks, down from over 50 percent only eight years ago; Chinese banks now hold 22 percent. These trends
                                  Officer, JPMorgan Chase & Co.       International Context." June 2011          are likely to continue as emerging markets continue to expand. If large U.S. banks are hobbled by uneconomic capital
                                                                                                                 levels or risk restrictions, a U.S. company is not going to turn to smaller U.S. banks to [. . .] lend it $200 million; rather,
                                                                                                                 it is going to turn to our foreign bank competitors.
International                     John Walsh, Acting Comptroller      Testimony at the House Financial Services  First, if capital and liquidity standards are set too high, we may unneccessarily restrict financial intermediation and
Competitiveness                   of the Currency                     Hearing: "Financial Regulatory Reform: The economic performance. Second, if some countries do not adopt the same high standards and enforce them with the same
                                                                      International Context." June 2011          rigor, we could wind up with an unlevel playing field that gives an advantage to firms in countries with less stringent

International                     Professor Hal S. Scott, Director of Testimony at the House Financial Services It will likely be late 2012 or 2013 before the E.U. completes its rules. If trading in the U.S. is more expensive, even for a
Competitiveness                   the Committee on Capital Markets Hearing: "Financial Regulatory Reform: The year, participants may shift trading abroad in order to incur lower costs, and once trading has moved abroad it will be
                                  Regulation, Nomura Professor and International Context." June 2011            difficult to get back.
                                  Director of the Program on
                                  International Financial Systems at
                                  Harvard Law

International                     Government Accountability Office GAO STUDY: Regulators Will Need More              According to interviews with foreign regulatory bodies, many countries are looking at changing capital requirements for
Competitiveness                                                    Comprehensive Information to Fully Monitor        proprietary trading activities, but no other industrialized countries in Europe or around the world plan to enact provisions
                                                                   Compliance with New Restrictions When             that parallel the U.S. restrictions. The foreign regulators we spoke with indicated that if the U.S. restrictions were
                                                                   Implemented. July 2011                            implemented in a way that restricts the ability of U.S. banking entities to serve their clients through market-making,
                                                                                                                     underwriting, or in other ways, that U.S. banking entities could lose business to their competitors in Europe and

International                     Gary E. Hughes, Executive Vice    Testimony at House Subcommittee on         A number of non-U.S. regulators have asserted that there are no G-SIFIs in their home country jurisdictions, thus
Competitiveness                   President & General Counsel,      Insurance, Housing and Community           protecting their domestic insurers from heightened regulation.
                                  American Council of Life Insurers Opportunity, "Policy Implications for U.S.
                                                                    Consumers, Businesses and Jobs." July 2011

International                     Daniel E. Nolle, Federal Reserve    U.S. Domestic and International Financial      The differences between <G20 commitments and the Dodd-Frank Act> in their emphasis on nonbanks could alter the
Competitiveness                                                       Reform Policy: Are G20 Commitments and         competitive landscape for U.S. nonbank financial firms relative to their foreign counterparts.
                                                                      the Dodd-Frank Act in Sync? July 2011

    Financial Stability Industry Council                                                                          As of 5/16/2012                                                                                                       Page 8
International                      Andrew Furgatch, Chairman of     Testimony at House Subcommittee on              Insurers are quite concerned that international non-governmental bodies without legislative accountability and
Competitiveness                    the Board, Magna Carta Insurance Insurance, Housing and Community                transparency are moving from developing best practices to attempting to impose binding standards. This poses the risk
                                   Companies                        Opportunity, "Policy Implications for U.S.      that European Union systems will be applied to US insurers when those systems have been developed for different
                                                                    Consumers, Businesses and Jobs." July 2011      markets and corporate structures that are less conducive to economic growth than the US structure. Such systems also
                                                                                                                    fail to recognize that the US system is partially regulated through general corporate law and an expensive tort system.
                                                                                                                    The conflict could result in the addition of new layers of duplicative and inefficient regulation for US insurers atop the
                                                                                                                    currently effective, but expensive US model.

International                      McKinsey&Company                   The State of Global Banking – In Search of a The return gap between growing markets and markets where growth will remain sluggish stands to widen over the
Competitiveness                                                       Sustainable Model. September 2011.           coming decade. Asian banks in particular are likely to achieve annual revenue growth of around 10% over the next
                                                                                                                   decade – double the rate of developed markets. Those banks that can tap into emerging market growth will be at a
                                                                                                                   significant advantage.US banks will need to grow net profits from $121 billion in 2010 to $312 billion in 2015 if they are
                                                                                                                   to achieve 12% ROE on new capital levels, implying annual profit growth of almost 20% and profit levels almost double
                                                                                                                   our forecasts for 2015.

                                                                                                  IMPACT OF SPECIFIC PROVISIONS

Topic                              Source                             Title/Date                                    Key Takeaways
Basel III                          Jamie Dimon, Chief Executive,      Financial Times, September 2011               I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are
                                   JPMorgan Chase & Co.                                                             blatantly anti-American.

Interchange                        David S. Evans, Robert E. Litan,   Economic Analysis of the Effects of the       According to our analysis and research, banks and credit unions will pass on much of the $33.4-$38.6 billion reduction
                                   Richard Schmalensee,               Federal Reserve Board’s Proposed Debit        in interchange fees to consumers and small businesses in the form of higher fees or reduced services during the 24 month
                                                                      Card Interchange Fee Regulations on           period following the implementation of the regulations.
                                                                      Consumers and Small Businesses. February

Interchange                        Drs. Bill Longbrake, Clifford      Assessing the Impact of Proposed Federal      The narrow definition of “allowable costs” in the Federal Reserve’s proposal to cap debit card interchange fees, which
                                   Rossi, University of Maryland      Reserve Debit Interchange. March 2011         limits them principally to direct variable costs of production, will exacerbate the negative and potentially far-reaching
                                                                                                                    consequences of market pricing intervention for consumers and small businesses and could slow down the economic
                                                                                                                    recovery at a time when the economy is still fragile.
Interchange                        Richard Davis, President and       U.S. Bancorp Says Regulations May Cost        The caps on debit-card transaction fees alone may cost the Minneapolis-based bank $400 million in annual revenue, said
                                   CEO, U.S. Bank                     More than $1 Billion. June 2011               Davis, 53.

Interchange                        Kevin Foster, Erik Meijer, Scott   The 2008 Survey of Consumer Payment           The average U.S. consumer makes 76.7 payments in a typical month. Consumers use cards most often for payments. In a
                                   Schuh, and Michael A. Zabek,       Choice. April, 2010.                          typical month, 52.9 percent of consumer payments are made using cards, and only 36.5 percent are made using paper
                                   Consumer Payments Research                                                       instruments. The remaining payments are made electronically or directly from income. These are percentages of the
                                   Center, Federal Reserve Bank of                                                  number of payments, not the dollar value of payments. More than half of U.S. consumers (51.6 percent) said that they
                                   Boston                                                                           wrote fewer checks in 2008 than they did in 2005. In contrast, during the same time period 49.5 percent of consumers
                                                                                                                    reported an increase in their use of debit cards.
Interchange                        Joanna Stavins, Senior Economist Potential Effects of an Increase in Debit       The cost of using debit cards seems to be an important factor affecting consumer payment decisions: consumers who
                                   and Policy Advisor, Federal      Card Fees. September, 2011.                     rated the cost of debit cards as low relative to the cost of using other payment methods were significantly more likely to
                                   Reserve Bank of Boston                                                           adopt and to use debit cards. In regressions of payment use, the relative cost of debit cards had a significant effect on the
                                                                                                                    use of credit cards, and vice versa, indicating that credit cards were viewed as the closest substitute for debit cards. If the
                                                                                                                    cost of using debit cards rises, consumers are most likely to substitute credit cards for some of their debit card
                                                                                                                    transactions. Consumer reaction depends on the type of fee increases: a specific increase in the cost of debit cards is
                                                                                                                    expected to have a greater effect on debit card use than would a broader increase in the cost of bank accounts. An
                                                                                                                    increase in the one-time cost of setting up a debit card could lead to a substantial decrease in the rate of adoption of debit

     Financial Stability Industry Council                                                                        As of 5/16/2012                                                                                                          Page 9
Interchange                       Todd Zywicki, Mercatus Center,     THE ECONOMICS OF PAYMENT CARD                    Efforts to regulate credit card networks in other countries have not produced net benefits, even though they may have
                                  GMU                                INTERCHANGE                                      benefited merchants at the expense of some consumers and banks.
                                                                     FEES AND THE LIMITS OF
                                                                     REGULATION, June 2010

Interchange                       Claes Bell, Bankrate               7 Ways Checking Accounts Cost You More,          Consumers are facing higher bank fees. Just 45 percent of noninterest checking accounts are free of maintenance
                                                                     September 2011.                                  charges, down from 65 percent in 2010 and 76 percent in 2009. "The entire model of free checking has been turned
                                                                                                                      upside down because of <Regulation E and the Durbin Amendment>," said Ajay Nagarkatte, managing director of
                                                                                                                      Chicago-based BAI Research, in the Bankrate survey
Interchange                       Direct Response Forum              Consumers May Not See Much Durbin Benefit        41% of merchants reported they do not intend to pass on lower debit card costs to consumers, when asked about the
                                                                     from Card-Not-Present Merchants, Septemeber      Durbin Amendment. 56% of merchants in the survey reported they don’t know yet what they will do.

Interchange                       Bankrate                           7 Ways Checking Accounts Cost You More,          30% of banks surveyed the year before had terminated their debit reward programs in 2011. Free checking offers have decreased
                                                                     September 2011.                                  30% since 2010.

Interchange                       Electronic Payment Coalition       Where’s the Debit Discount? Durbin Price        Retail prices actually increased 1.7% since the Durbin Amendment.
                                                                     Controls Fail to Ring Up Savings for Consumers.
                                                                     December, 2011.

Interchange                       Pulse Network's 2011 Debit         2011 Debit Insurers Study: Amid Strong Market, 54% of institutions report looking to re-structure or terminate rewards programs due to Durbin
                                  Insurers Survey                    Insurers Bracing for Pending Changes. June 2011.

Interchange                       Ignacio Urrabazo, President of     Testimony before the Subcommittee on Financial Elimination of fee incomes through Durbin and limitations of overdraft fees are hurting community banks. These fees
                                  Commerce Bank                      Institutions and Consumer Credit Committee on are critical to the survival of community banking: it is key that noninterest income helps provide many of our banking
                                                                     Financial Services, March 14, 2012.            products and services for consumers

Interchange                       Cliff McCauley, Senior Executive   Testimony before the Subcommittee on Financial   The Durbin Amendment will cause some of the smaller institutions to cease offering debt cards to their consumers.
                                  VP of Frost Bank                   Institutions and Consumer Credit Committee on
                                                                     Financial Services, March 14, 2012.

Interchange                       Brett King, Fine Extra             Why Durbin will Kill the Branch. March 26,       As it has been seen, community banks are closing all across the country. It seems the impact of Dodd-Frank, specifically
                                                                     2012.                                            the Durbin Amendment your local Bank of America Branch may close now too. The unintended consequences of
                                                                                                                      Durbin may very well be the rapid unwinding of branch banking in the US. It takes a long time to turn the ship, but once
                                                                                                                      that turn starts the momentum of branch closures will speed up rapidly.

Derivatives/CFTC                  Office of the Inspector General    An Investigation Regarding Cost-Benefit          We were also troubled at the lack of available (and verified) data pertaining to compliance costs borne by the industry, at
                                                                     Analyses                                         least at the proposed rulemaking stage. Staff indicated that industry and market participants historically have not
                                                                     Performed by the Commodity Futures               provided compliance costs to the Agency. However, information is being provided to the Commission at this point that
                                                                     Trading Commission                               does quantify costs. In addition to the rule comments cited throughout this report discussing costs (and we did not cite
                                                                     in Connection with Rulemakings Undertaken        them all), we would recommend review of the transcript of the Third meeting of the CFTC Technology Advisory
                                                                     Pursuant to the                                  Committee presented by the Commission earlier this year. At that meeting, the Commission was presented with a $1.8
                                                                     Dodd-Frank Act. April 2011                       billion cost estimate to implement compliance with information technology requirements necessitated under Dodd-Frank,
                                                                                                                      for the top 15 large dealers. We believe the Commission will have a formidable task verifying estimated costs submitted
                                                                                                                      by industry sources, and squaring them with the apparent staff view that the Dodd-Frank rules (or at least the four we
                                                                                                                      reviewed) largely document current practices.

    Financial Stability Industry Council                                                                           As of 5/16/2012                                                                                                          Page 10
Derivatives                        Institute for International Finance   Interim Report on the Cumulative Impact on       This would have a substantial effect on the profitability of banks that are heavily involved in derivatives businesses, and
                                                                         the Global Economy of Proposed Changes in        on derivatives markets. This point is expected to be hotly debated in the conference process leading up to a final law.
                                                                         the Banking Regulatory Framework. June           There is no global consensus about the appropriateness of such a measure and little prospect that it would be adopted
                                                                         2010                                             more widely.

Derivatives                        International Swaps and               Letter filed February 28, 2011 in response to    “We respectfully submit that the Commission’s estimate of the cost of compliance with the Proposed Regulations is too
                                   Derivatives Association               the notice of proposed rulemaking:               low. The Commission pegs the upfront cost for technological improvements at $2400 for each SD and MSP, whereas at
                                                                         “Confirmation, Portfolio Reconciliation, and     this juncture we believe that initial compliance with the Proposed Regulations will cost each such entity approximately
                                                                         Portfolio Compression Requirements for           $5-10 million.”
                                                                         Swap Dealers and Major Swap Participants.”
                                                                         75 FR 81519. February 2011

CARD Act                           NY Daily News                         Banks quicker to lower customers' credit         Despite the Credit Card Accountability, Responsibility and Disclosure Act - which in 2009 imposed new notification
                                                                         ceilings despite excellent track record (April   rules on companies and banned unfair fees and rate hikes - card companies are still allowed to chop credit limits without
                                                                         2011)                                            notice.
                                                                                                                          Banks have backed off a bit since the depths of the recession, but in January 2011, 11% of them still reported cutting
                                                                                                                          customers' credit card limits in the prior three months, according to a survey by the Federal Reserve.

Volcker                            Frank Keating, President and          American Bankers Association Statement on Regulators' own estimates indicate banks will have to spend nearly 6.6 million hours to implement the Volcker rule, of
                                   CEO, American Bankers                 Proposed Volcker Rule. October 2011.      which more than 1.8 million hours would be required every year in perpetuity. That translates into 3,292 years, or more
                                   Association                                                                     than 3,000 bank employees whose sole job will be complying with this rule. They will be transferred to a role that
                                                                                                                   provides no customer service, generates zero revenue and does nothing for the economy.

Volcker                            Financial Stability Oversight         Study & Recommendations on Prohibitions N/A
                                   Council                               on Propritary Trading & Certain
                                                                         Relationships with Hedge Funds & Private
                                                                         Equity Funds. January 2011
Volcker                            Congressional Research Service        The Status of the Basel III Capital Adequacy The Basel III trading-book rules may be in conflict with the Volcker rule that prohibits a bank or institution that owns a
                                                                         Accord. October 2010                         bank from (1) engaging in proprietary trading (buying and selling securities and equities) that is not at the behest of its
                                                                                                                      customers, (2) owning or investing in a hedge fund or a private equity fund, and (3) limiting the liabilities that the largest
                                                                                                                      banks could hold. Because other member countries of the Basel Committee have not embraced the Volcker
                                                                                                                      rule, its implementation in the United States may lower U.S. bank profits domestically. If bank profits drop at home
                                                                                                                      because of the Volcker rule, U.S. banks may move their proprietary trading activities to their foreign operations. This
                                                                                                                      transfer could have a negative impact on U.S. trade in financial services.

Volcker                            Mr. Barry L. Zubrow, Executive        Testimony at the House Financial Services  The Volcker Rule has been rejected by every country to have considered it. . .
                                   Vice President and Chief Risk         Hearing: "Financial Regulatory Reform: The
                                   Officer, JPMorgan Chase & Co.         International Context" June 2011

Volcker                            Institute for International Finance   Interim Report on the Cumulative Impact on       In the event of “Volcker” being adopted, the macro economic implications could be considerable—over a considerable
                                                                         the Global Economy of Proposed Changes in        time scale. The ability of affected banks to extend credit (in all its forms) would be reduced and regulatory arbitrage
                                                                         the Banking Regulatory Framework. June           would inevitably result in a reconfiguration of financial intermediation. The macro economic effects would be substantial
                                                                         2010                                             but are difficult to quantify at present. In addition, the Volcker plan in the US would put an additional cap on the size
                                                                                                                          that any bank group could attain in the US, and there has been discussion of more radical plans to limit bank size and
                                                                                                                          market share.

Volcker                            Oliver Wyman Study                    The Volker Rule: Considerations for              The Volker Rule cost American businesses up to $315 billion, increase borrowing costs by up to $43 billion per year,
                                                                         Implementation of Proprietary Trading            require 6,600,000 hours for implementation, dramatically reduces liquidity, lower investment returns for mutual funds,
                                                                         Regulations. January 2012.                       pension plans, etc., increase the cost of credit for consumers, and put U.S. banking institutions at a competitive

     Financial Stability Industry Council                                                                             As of 5/16/2012                                                                                                       Page 11
Volcker                            George Friedlander                    City Group Global Market Study, January 2012.      (Regarding exempting all municipal bonds from the Volker Rule restrictions) This would ultimately force investors to
                                                                                                                            rely on non-bank third parties to provide liquidity and partially mitigate otherwise massive price volatility. In our view,
                                                                                                                            this would result in a dramatic increase in volatility and reduction in market liquidity that would ultimately cause
                                                                                                                            borrowing costs for all municipal issuers to rise.

Volcker                            IHS study                             The Volcker Rule: Impact assesment on the U.S.     Natural gas investment reduced by $7.5 billion leading to 182,000 job losses. Electricity costs increase by $5.3 billion
                                                                         energy industry and economy. March, 2012.          per year. Closure of two additional refineries impacting local economy along East Coast. Gasoline prices increase $2
                                                                                                                            billion per year. Energy consumers impacted by high prices and increased price volatility.

Consumer Financial                 Mercatus Center                       THE EFFECT OF THE CONSUMER                         Make it harder and more expensive for consumers to borrow, and would risk reversing the decadeslong trend towards the
Protection Bureau                                                        FINANCIAL PROTECTION AGENCY                        democratization of credit; Create a “supernanny” agency that is designed to substitute the choice of bureaucrats for those
                                                                         ACT OF 2009 ON CONSUMER CREDIT.                    of consumers; and Jeopardize financial recovery by reducing credit during a severe economic recession; a time when the
                                                                         March 2010                                         economy is fragile and there is already too little credit.

Capital                            Institute for International Finance   The Macroeconomic Implications of Basel            3% impact on GDP
                                                                         III. March 2011
Capital                            OECD                                  Macroeconomic Impact of Basel III.                 The estimated medium-term impact of Basel III implementation on GDP growth is in the range of -0.05 to -0.15
                                                                         February 2011                                      percentage point per annum. Economic output is mainly affected by an increase in bank lending spreads as banks pass a
                                                                                                                            rise in bank funding costs, due to higher capital requirements, to their customers. To meet the capital requirements
                                                                                                                            effective in 2015 (4.5% for the common equity ratio, 6% for the Tier 1 capital ratio), banks are estimated to increase
                                                                                                                            their lending spreads on average by about 15 basis points. The capital requirements effective as of 2019 (7% for the
                                                                                                                            common equity ratio, 8.5% for the Tier 1 capital ratio) could increase bank lending spreads by about 50 basis points. The
                                                                                                                            estimated effects on GDP growth assume no active response from monetary policy. To the extent that monetary policy
                                                                                                                            will no longer be constrained by the zero lower bound, the Basel III impact on economic output could be offset by a
                                                                                                                            reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points.

Capital                            McKinsey & Company                    Basel III and European banking: Its impact,        The capital need is equivalent to almost 60 percent of all European and US Tier 1 capital outstanding, and the liquidity
                                                                         how banks might respond, and the                   gap equivalent to roughly 50 percent of all outstanding short-term liquidity. Closing these gaps will have a substantial
                                                                         challenges of implementation. November             impact on profitability. All other things being equal, Basel III would reduce return on equity (ROE) for the average bank
                                                                         2010                                               by about 4 percentage points in Europe and about 3 percentage points in the United States. The retail, corporate, and
                                                                                                                            investment banking segments will be affected in different ways. Retail banks will be affected least, though institutions
                                                                                                                            with very low capital ratios may find themselves under significant pressure. Corporate banks will be affected primarily
                                                                                                                            in specialized lending and trade finance. Investment banks will find several core businesses profoundly affected,
                                                                                                                            particularly trading and securitization businesses. Most banks with substantial capital markets and trading business will
                                                                                                                            likely face significant business-model challenges in the next few years.

Capital                            Congressional Research Service        The Status of the Basel III Capital Adequacy Basel III would significantly raise the capital requirement on banks. At the end of the implementation period, Basel III
                                                                         Accord. October 2010                         could require a minimum total requirement of 13% of a bank’s risk-weighted assists. This is a level very few large U.S.
                                                                                                                      banks were able to achieve at the height of their record level of profits in 2006.

     Financial Stability Industry Council                                                                                As of 5/16/2012                                                                                                       Page 12
Capital                            Institute for International Finance   Interim Report on the Cumulative Impact on        The imposition of tighter regulatory controls over the next five years raises core Tier 1 capital requirements for US banks
                                                                         the Global Economy of Proposed Changes in         by about $250 billion by 2015. This, and a variety of other changes in funding costs, would lead to an increase in bank
                                                                         the Banking Regulatory Framework. June            lending rates of about 193 basis points by 2014. This is all the more the case as it is not apparent that the leverage-ratio
                                                                         2010                                              proposals have taken into account the effects of the liquidity requirements, which will likely push banks to more lower-
                                                                                                                           yielding government obligations. The requirements as currently drafted are extremely strict—in terms of both the
                                                                                                                           calibration of the pressures on firms’ likely liquidity needs and the assets eligible to be counted as liquid. It will certainly
                                                                                                                           have effects on both short-term and medium-term markets and also change the market among banks for other banks
                                                                                                                           paper, which is generally treated less than favorably. It is likely that contingent capital—that is debt which is convertible
                                                                                                                           into equity in certain prescribed stressed conditions—will be allowed or possibly even required. 

Capital                            Institute for International Finance   Net Cumulative Economic Impact of                 Redefinition of capital and timing will cost US banking system $80 billion
                                                                         Banking Sector Regulation: Some new
                                                                         Perspectives. October 2010

Capital                            Macroeconomic Assessment              Assessing the macroeconomic impact of the         In its Interim Report, the MAG concludes that, for each percentage point increase in the target capital ratio implemented
                                   Group                                 transition to stronger capital and liquidity      over a four-year horizon, the level of GDP relative to the baseline path declines by a maximum of about 0.19%.
                                                                         requirements - Interim Report. August 2010

Capital                            Jamie Dimon, President and CEO, Dimon to Shun Mortgage Ownership Under                  JPMorgan, the most profitable U.S. bank, won’t make “an adequate return” on certain products under the proposed rules
                                   JPMorgan Chase & Co.            Proposed Capital Rules, June 2011                       and reduce portfolio assets, including mortgages, that require higher levels of capital, Dimon said. The proposal may
                                                                                                                           disadvantage U.S. banks that compete globally, as Dimon said he’s heard that Japan, China and India may be excluded
                                                                                                                           from the rules, giving banks based in those countries a competitive edge.

Capital                            Bank for International                An assessment of the long-term economic           The FSB-BCBS MAG assessment of the macroeconomic transition costs, prepared in close collaboration with the
                                   Settlements, Basel Committee on       impact of stronger capital and liquidity          International Monetary Fund, concludes that the transition to stronger capital and liquidity standards is likely to have a
                                   Banking Supervision                   requirements. August 2010                         modest impact on aggregate output. If higher requirements are phased in over four years, the group estimates that each
                                                                                                                           one percentage point increase in bank's actual ratio of tangible common equity to risk-weighted assets will lead to a
                                                                                                                           decline in the level of GDP relative to its baseline path by about 0.20% after implementation is completed. In terms of
                                                                                                                           growth rates, this means that the annual growth rate would be reduced by an average of 0.04 percentage points over a
                                                                                                                           four and a half year period, with a range of results around these point estimates. A 25% increase in liquid asset holdings
                                                                                                                           is found to have an output effect less than half that associated with a one-percentage point increase in capital ratios. The
                                                                                                                           projected impacts arise mainly from banks passing on higher costs to borrowers, which results in a slowdown in

Capital                            Neil Weinberg, Columnist              AmericanBanker, September 2011                    Fewer and bigger banks: Because the legislation will be so costly to comply with, banks will have more incentive than
                                                                                                                           ever to consolidate into the sort of too-big-to-fail banks the bill was designed to stamp out. "Dodd-Frank has raised the
                                                                                                                           cost of financial transactions in America and that encourages consolidation because it's the only way you can spread the
                                                                                                                           costs over larger assets," said Tom Hoenig, president of the Federal Reserve Bank of Kansas City.Drawing lines in the
                                                                                                                           sand: Under Dodd-Frank the Federal Reserve is charged with deciding whether mergers would create too-big-to-fail
                                                                                                                           institutions. Capital One now faces the first such review. As editor at large Barbara Rehm wrote earlier this week, the
                                                                                                                           Fed may feel compelled by approve Cap One's acquisition of ING's online operations precisely to avoid stranding even
                                                                                                                           bigger banks in a no-man's land where any and all M&A is deemed unacceptable.Higher consumer costs: With higher
                                                                                                                           regulatory costs, including debit card fee caps imposed by government fiat, banks are hiking fees elsewhere. SunTrust
                                                                                                                           and others are adding new annual fees, TD Bank has begun charging customers to use other banks' ATMs and U.S. Bank
                                                                                                                           is increasing what it charges for paper statements, noted Friedman Billings Ramsey analyst Paul Miller. "It has become
                                                                                                                           more expensive for consumers to use banks," added Elizabeth Robertson of Javelin Strategy & Research.Fewer
Capital                            Vikram Pandit, Chief Executive,       Wall Street Journal, Setember 2011                The safety of the financial system cannot be guaranteed solely or even mostly through high capital requirements on
                                   Citigroup Inc                                                                           banks. Paradoxically, the higher we set capital requirements for banks, the more money flows into unregulated or less
                                                                                                                           regulated sectors of the system, thereby increasing systemic risk

     Financial Stability Industry Council                                                                               As of 5/16/2012                                                                                                         Page 13
Capital                            Clearing House Association            "How Much Capital is Enough?" Capital            Since 4Q 2007, U.S. banks have added approximately $200-250 billion in additional Tier 1 common equity and, with
                                                                         Levels and G-SIB Capital Surcharges.             Basel III fully phased-in, an additional $300 billion more will be added; Relative to pre-crisis levels, banks will hold
                                                                         September, 2011.                                 100% more capital, or $525 billion in common equity, to meet Basel III’s common equity capital requirement; If the
                                                                                                                          global systemically important bank (G-SIB) surcharge is imposed, these banks will need to raise approximately 20%
                                                                                                                          more capital, or $200 billion beyond those levels required by fully-phased-in Basel III requirements; Using the Federal
                                                                                                                          Reserve’s adverse stress scenario (March 2011), we found that, if banks began at Basel III’s minimum common equity
                                                                                                                          ratio of 7%, the banks on average would only suffer a 0.6 percentage point reduction in their Basel III common equity
                                                                                                                          ratios – well within the 2.5 % buffer included in Basel III minimums; No bank that had a common equity ratio greater
                                                                                                                          than or equal to the Basel III minimum of 7% before the crisis experienced serious distress during the crisis; With a G-
                                                                                                                          SIB surcharge, banks are likely to increase the borrowing costs to their customers by 60 basis points (a 15% increase in
                                                                                                                          their net interest margins) or reduce their non-interest expense ratios by almost 20 percentage points (a 33% reduction in
                                                                                                                          expenses); and we estimate that the cumulative impact of the Basel III minimum capital requirements and G-SIB
                                                                                                                          surcharges would decrease return on equity (ROE) by up to 4.9 percentage points for most U.S. banks.
Capital                            Bloomberg Government Study            Basel III: How U.S. Banks Will Fare Under        Increasing capital levels by the amounts required under Basel III might affect long-term profitability, loan growth and
                                                                         New Capital Requirement, June 2011               economic growth.

Systemic Risk Designation          Insurance Information Institute       Property/Casualty Insurance and Systemic         Inappropriate inclusion of P/C insurers could cause harm not only to insurers, but to consumers and the efficacy of
                                                                         Risk. April 2011                                 financial institution regulation in general. The report reviews specifically how this inclusion could do economic harm and
                                                                                                                          concludes that P/C insurance is fundamentally different from banking, posing no systemic risk to the financial system.

Systemic Risk Designation          Institute for International Finance   Systemic Risk and Systemically Important         While it is essential to come to grips with the complexities of systemic risk, it is equally important to do so in a balanced
                                                                         Firms: An Integrated Approach. May 2010          way which does not sacrifice the benefits that global firms bring. Well-run large international firms bring incalculable
                                                                                                                          benefits to the global economy. They intermediate savings and investments from around the world, provide financial
                                                                                                                          support to firms and countries—both emerging and established—on competitive terms, share good practice, and are an
                                                                                                                          indispensable source of resilience
                                                                                                                          in times of stress. Most of these benefits could not be replicated by smaller firms—at least on any competitive basis.
                                                                                                                          Recent policy debates, while understandably focusing on risk, have tended to overlook these benefits.
Systemic Risk Designation          Bank for International Settlements Guidance to Assess the Systemic Importance          This paper responds to the request of the G-20 leaders for guidelines on how national authorities can assess the systemic
                                   / International Monetary Fund /    of Financial Institutions, Markets and              importance of financial institutions, markets, or instruments. Reflecting the current state of analysis and country
                                   Financial Stability Board          Instruments: Initial Considerations. October        practices, the paper outlines conceptual and analytical approaches to the assessment of systemic importance and
                                                                      2009                                                discusses a possible form for general guidelines. The assessments would involve a high degree of judgment, and the
                                                                                                                          guidelines should be sufficiently flexible to apply to a broad range of countries and circumstances. More detailed
                                                                                                                          guidelines could be developed as the state of knowledge in this field evolves and deepens.

Systemic Risk Designation          Institute for International Finance   SIFI Surcharges: Fundamental                     Additional regulation imposed on SIFIs could have detrimental economic implications. The paper provides an illustrative
                                                                         Issues and Empirical Estimates. April 2011       quantitative assessment of the effect of SIFI surcharges. A surcharge involving a 1-3 percentage point increase a year in
                                                                                                                          the core tier 1 capital ratio for SIFIs, over and above the capital requirements of Basel III, would result in additional
                                                                                                                          average capital needs of 8-27% for a sample of countries including the G3, Switzerland and the U.K.. Over the first 2
                                                                                                                          years of implementation of the surcharge, growth could be reduced by as much as 0.2 percentage points compared to the
                                                                                                                          growth impact of the Basel III regulation. This impact estimate is purely illustrative and highly dependent on the
                                                                                                                          assumptions and methodology used (in particular, it concentrates on the costs of the surcharge, without discounting the
                                                                                                                          potential benefits). But it suggests that the potential economic effects of a SIFI surcharge could be important and should
                                                                                                                          be taken into account when debating SIFI regulation.

Systemic Risk Designation          Brookings Institute                   Identifying and Regulating Systemically          There will be both positives and negatives for institutions designated as SIFIs, but the negatives (more regulation) are
                                                                         Important Financial Institutions: The Risks      likely to outweigh the positives (potentially lower funding costs) in most cases. The major reason for this, we believe, is
                                                                         of Under and Over Identification and             that once an institution is designated it is subject not only to what may be a current set of additional regulatory measures,
                                                                         Regulation. January 2011                         but to a continuing process of possibly strengthened oversight in the future. This uncertainty about the course of future
                                                                                                                          regulation alone is a cost that most institutions would probably want to avoid if they could.

     Financial Stability Industry Council                                                                              As of 5/16/2012                                                                                                       Page 14
Systemic Risk Designation          Karen Petrou. Federal Financial       A New Framework for Systemic Financial            "We have concluded that what we call complexity risk – the burden on financial institutions and regulators of complex,
                                   Analytics, Inc                        Regulation: Simple, Transparent, Enforceable      cross-cutting and sometimes incomprehensible rules – may well now be the most significant impediment to financial-
                                                                         and Accountable Rules to Reform Financial         market recovery and robust economic growth."

Resolution/Recovery                Davis Polk/ McKinsey & Company Credible Living Wills: The First Generation              Living wills, if designed and implemented properly, have the potential to be a highly effective tool for improving risk
                                                                  (PDF). April 2011                                        management, reducing systemic risk and mitigating the too big to fail and too big to save problems.

Resolution/Recovery                Institute for International Finance   Interim Report on the Cumulative Impact on        These plans would entail three types of costs. Putting in place the elements of the plan itself – making improvements to
                                                                         the Global Economy of Proposed Changes in         ‘knowing your business’, responding to the information needs of regulators and colleges involve some cost. To the extent
                                                                         the Banking Regulatory Framework. June            that firms are then obliged to make changes to the business—to simplify structures, develop new IT and reporting, or to
                                                                         2010                                              put in place additional assured sources of liquidity or capital, this will involve significant additional costs, including
                                                                                                                           higher tax burdens, on the institutions concerned. The third, and probably most substantial, set of costs arises from the
                                                                                                                           resolution or winding down of failed institutions. Such costs may arise from a variety of sources, including the need for
                                                                                                                           working capital or the costs associated with transferring systemically important activities to a bridge institution. There is
                                                                                                                           general agreement (including from the industry) that such costs should not fall to taxpayers and that the industry should
                                                                                                                           pay. Much current debate focuses on whether these costs should be met from resolution funds set up in advance, or by
                                                                                                                           means of recovering costs from the financial sector following resolution.

Stress Tests                       Federal Reserve Bank of New           The Information Value of the Stress Test and Our findings suggest that the stress test helped quell the financial panic by producing vital information about banks
                                   York                                  Bank Opacity, July 2010

Concentration Limits               Financial Stability Oversight         Study & Recommendations Regarding                 N/A
                                   Council                               Concentration Limits on Large Financial
                                                                         Companies. January 2011

Fiduciary Responsibility           Oliver Wyman                          Assessment of the impact of the Department     In current sample, high-level estimates suggest that 3.8 million accounts could exit the retirement market under the
                                                                         of Labor's proposed "fiduciary" definition     proposed rule…..Based on this study sample, a significant share of brokerage accounts may be able to continue receiving
                                                                         rule on IRA consumers (PDF, not online).       investment help and guidance by moving to an advisory relationship. Such investor would then face increased annual
                                                                         April 2011                                     costs, due to the higher cost of servicing and maintainin these accounts. Investors would pay an average of 73% to 19%
                                                                                                                        more in direct costs in a fee-based advisory model.
CFPB                               Ignacio Urrabazo, President of        Testimony before the Subcommittee on Financial CFPBs overdraft program review is not only hurting banks, but consumers as well. Consumers want overdraft programs
                                   Commerce Bank                         Institutions and Consumer Credit Committee on and many banks are considering get rid of them due to the expense, burden, and regulatory risk.
                                                                         Financial Services, March 14, 2012.

Mortgage Lending                   Cliff McCauley, Senior Executive      Testimony before the Subcommittee on Financial Inflexible loan to value ratios and repayment ability criteria are likely to have the effect of putting home ownership out of
                                   VP of Frost Bank                      Institutions and Consumer Credit Committee on reach for many Americans.
                                                                         Financial Services, March 14, 2012.

Lending                            Institute for International Finance   Multiple Layers of Financial Regulatory Reforms Real lending rates in the U.S. are projected to increase by 468 basis points, (or 701 basis points if reform is implemented
                                                                         Hold Back Economic Growth and Will Continue rapidly), exponentially increasing the cost of education, loans, home loans, commercial loans, etc.)
                                                                         to Do So for Some Time, September 6, 2011.

     Financial Stability Industry Council                                                                               As of 5/16/2012                                                                                                       Page 15
Liquidity                          The Clearing House   The Basel III Liquidity Framework: Impacts The shortfall is primarily driven by the specific prescriptions and quantitative calibrations of the Basel III framework that
                                                        and Recommendations, November 2nd, 2011 are neither based on sound empirical research nor supported by industry experience during the 2008 financial crisis. The
                                                                                                   mere fact that the U.S. banking industry’s liquid asset shortfall under the LCR increased between year-end 2009 and
                                                                                                   2010, while during the same period banks increased the proportion of their assets consisting of cash, cash equivalents,
                                                                                                   Treasury securities and other liquid assets and reduced their net cash outflows over a 30-day horizon, illustrates the
                                                                                                   importance of revisiting and revising elements of the LCR.

     Financial Stability Industry Council                                                           As of 5/16/2012                                                                                                   Page 16

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