Corporate Trust Current Issues Update
Terry McRoberts
EVP, Corporate Trust Services – Regional Management & National Sales
March 28, 2012
1
US Banks
Assets
Market Value
U.S.
Rank
Company
$Billions
U.S.
Rank
Company
$Billions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
J.P. Morgan
Bank of America
Citigroup
Wells Fargo
U.S. Bancorp
Bank of NY Mellon
PNC
SunTrust
BB&T
Regions
$2,289
$2,220
$1,936
$1,305
$ 330
$ 304
$ 269
$ 173
$ 168
$ 130
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Wells Fargo
J.P. Morgan
Citigroup
Bank of America
U.S. Bancorp
PNC
Bank of NY Mellon
BB&T
Fifth Third
SunTrust
$135
$131
$ 90
$ 65
$ 48
$ 28
$ 26
$ 16
$ 11
$ 10
Source: company reports & FactSet
Assets as of September 30, 2011; Market Value as of October 25, 2011
2
FIRMS
Who is in the Business?




Municipal Tax-Exempt Bond Market
Corporate Taxable Bond Market
Structured Finance and Bond Market
Business Escrow Services
3
Municipal Tax-Exempt Bond Trustee
Trustee Bank
2011 Deals
# of Deals
1. Bank of New York Mellon
2. US Bank
3. Wells Fargo Bank
4. UMB Bank
5. Regions Bank
6. M&T/Wilmington Trust Bank
7. Zions Bank
8. Bank of Oklahoma
9. Deutsche Bank
10. Union Bank
549
480
213
73
71
59
32
32
25
25
Total Top 10
1559
P/V ($ billions)
Market Share (#)
$39.1
$26.6
$11.8
$ 0.8
$ 3.2
$ 3.3
29.6%
25.9%
11.5%
3.9%
3.8%
3.2%
$
$
$
$
0.8
0.6
1.3
0.7
1.7%
1.7%
1.4%
1.4%
$ 88.2
84.1%
Source: Thompson Reuters
Third Quarter 2011
4
Corporate Taxable Bond Trustee
Trustee Bank
2011 Deals
# of Deals
1. Bank of New York Mellon
2. US Bank
3. Wells Fargo Bank
4. Deutsche Bank
5. M&T/Wilmington Trust Bank
6. Law Debenture Bank
7. Citibank
8. Mitsubishi UFJ Bank
9. HSBC Bank
10. UMB Bank
375
146
134
82
66
13
7
8
6
4
Total Top 10
841
P/V ($ billions)
Market Share (#)
$281
$ 82
$ 71
$ 66
$ 39
44.6%
17.4%
15.9%
9.8%
7.9%
$ 15
$ 7
$ 7
$ 6
$ 3
1.5%
0.8%
0.9%
0.7%
0.5%
$ 577
100%
Source: Thompson Reuters
Third Quarter 2011
5
Structured Finance Bond Trustee
Trustee Bank
2011 Deals
# of Deals
1. Bank of New York Mellon
2. Deutsche Bank
3. Wells Fargo Bank
4. US Bank
5. Citibank
6. Law Debenture Bank
7. Perpetual Trustee
8. State Street
9. M&T/Wilmington Trust
10. Bank of Oklahoma
Total Top 10
P/V ($ billions)
Market Share (#)
64
51
57
41
20
1
3
3
2
1
$41
$29
$25
$21
$13
$ 4
$ 2
$ 2
$ 2
$0.2
29.6%
14.9%
21.1%
17.6%
9.6%
2.7%
1.3%
1.3%
1.3%
0.6%
243
$ 141
100%
Source: Thompson Reuters
Third Quarter 2011
6
Market Issues Coming into 2012
Potential Supply /
Demand Imbalance
Market
Credit
Differentiation
Build America Bonds
Record volume of expiring credit facilities
Outflows from municipal bond funds
Expiration of an estimated $65 billion in letters of credit and liquidity facilities
Basel III impact on the availability and price for credit/liquidity facilities
Alternatives (Direct Purchase, Floating Rate Notes, Put Bonds)
Concentration of credit enhancement providers
Investors and rating agencies more focused on underlying credit profiles
Headline risk
Future of bond insurance
Counterparty risks
7
Market Issues
Observations
Municipal Credit Expirations
Billions
 Basel III impact on the availability and price of credit
 Record volume of expiring bank credit facilities have
$120.0
$112
SBPA Expirations
LOC Expirations
$100.0
$37
not taxed the market as expected
$80.0
$65
 Issuers have been successful in extending expiring
$60.0
$18
credit facilities or restructuring outstanding VRDNs
$49
$42
$40.0
 62% facilities extended*
$15
$75
$20
$47
$20.0
 15% facilities substituted*
$34
$22
$0.0
 22% restructured (5% with direct bank loans)*
2011
2012
Year
2013
2014+
Source: Thomson Reuters
*Moody’s Investor Service 9/15/2011
8
8
Impacts of the Changing Regulatory Landscape
“A Rocky Road Ahead”
9
ABA CTC OVERVIEW
 SEC Rule 17Ad-16
 SEC Rule 17g – 7
 SEC Rule 15Ga – 1
 Reputation Risk
 Municipal Advisors
 Municipal Disclosure - EMMA
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ABA CTC OVERVIEW
 Foreclosure Issues
 Basel III Liquidity Impact
 Missing Security Holders
 Moody’s Appointment of Agents Issue
 Cost Basis Reporting
11
Corporate Trust Audit Environment
 Bank Audit
 Corporate Trust
Compliance
 SQRM
 Self Assessment
 OCC Teams
 Federal Reserve Bank
 SEC Audits
12