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Chart 86: Following last week’s GOP sweep, do you think regulatory relief is in the cards for the financial services industry? 70% 62% 60% 50% 40% 30% 20% 10% 0% Yes, and this should havea Yes, but change in regulatory No, | think there will be little meaningful impact to returns burden and subsequent impact change in regulatory burden to bank returns will be more gradual than what financial stocks are currently pricing in Source: BofA Merrill Lynch Global Research = CCAR a product of regulatory attitude: The panelists agreed that CCAR in its current form is not a result of legislation as post-recession bank stress tests (SCAP) existed prior to Dodd-Frank. Furthermore, the panelists noted Dodd-Frank’s definition of a stress test is very basic, which has been made more stringent and complex as a result of regulators. Mr Cohen also noted that a lack of transparency of the test was the least defensible part of CCAR. = Biggest obstacle for bank M&A and activist influence is regulation. Despite headlines of increased shareholder activism within the banking industry, the majority of investors polled (61%) believe activist investors have only a moderate impact on corporate strategy (see chart). Specifically, Mr. Cohen explained that two of the three reasons why an activist will typically get involved with a corporate are difficult to achieve on a bank’s board given the level of regulatory oversight on the industry. While selling the bank is the one area where activists have had success, this typically occurs at the community bank level. That said, he believes a change in attitude of regulators could free up M&A activity. Chart 87: What kind of impact does an activist investor have in corporate strategy and ultimate shareholder value? 10% 61% 60% 50% 40% 30% 20% 10% 0% Meaningful impact, as activism Moderate impact, as activism No meaningful impact, as many behooves complacent Boards can bring issues to the forefront activists have a short-sighted to rethink corporate strategy in and can invigorate deal view of shareholder value a way that is most positive to discussions but have modest near-term and long-term _ influence in corporate strategy shareholder value and ultimate shareholder value Source: BofA Merrill Lynch Global Research Bankof America Merrill Lynch 2016 Future of Financials Conference | 17 November 2016 59 HOUSE_OVERSIGHT_014373