Exhibit 10.1

 
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
 
Written Agreement by and between
 
CIT GROUP INC.
New York, New York
 
and
 
FEDERAL RESERVE BANK OF
   NEW YORK
New York, New York
 
 
 
 
 
 
          Docket No. 09-114-WA/RB-HC

WHEREAS, CIT Group Inc., New York, New York (“Bancorp”), a registered bank
holding company, owns and controls CIT Bank, Salt Lake City, Utah (the “Bank”),
a state chartered nonmember bank, and various nonbank subsidiaries;
WHEREAS, it is the common goal of Bancorp and the Federal Reserve Bank of New
York (the “Reserve Bank”) to maintain the financial soundness of Bancorp so that
Bancorp may serve as a source of strength to the Bank;
WHEREAS, Bancorp and the Reserve Bank have mutually agreed to enter into this
Written Agreement (the "Agreement"); and
WHEREAS, on August 12, 2009, Bancorp’s board of directors, at a duly constituted
meeting, adopted a resolution authorizing and directing the Chief Executive
Officer to consent to this Agreement on behalf of Bancorp, and consenting to
compliance with each and every applicable provision of this Agreement by Bancorp
and its institution-affiliated parties, as
 
 

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defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as
amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 1818(b)(3)).
NOW, THEREFORE, Bancorp and the Reserve Bank agree as follows:
Corporate Governance
1.           Within 75 days of this Agreement, Bancorp shall provide the Reserve
Bank with a written plan (the “Corporate Governance Plan”) outlining the
specific actions Bancorp will take, including timeframes, to strengthen
Bancorp’s management and corporate governance consistent with the responsibility
of Bancorp’s board of directors to effectively and adequately oversee Bancorp’s
senior management and business affairs. The Corporate Governance Plan shall, at
a minimum, address, consider and include:
(a)           The adequacy of staffing levels, including an assessment of
whether the audit, risk management and control functions of Bancorp are
adequately staffed and provided with adequate resources;
(b)           measures to enhance Bancorp’s board of directors’ oversight of
risk management processes in order that risk appetite decisions and the setting
of risk tolerance levels, including, but not limited to, credit and liquidity
risk exposures of the business lines and on a consolidated basis, are made and
documented with an identification and consideration of, new and emerging risks,
adverse trends, and the additional risk management controls needed to manage
such risks and trends;
(c)           measures to enhance the identification and reporting to Bancorp’s
board of directors and senior management of deviations from established risk
limits and risk management objectives; and
(d)           steps so that compensation and other incentives provided to senior
 
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management and other employees are risk sensitive and aligned with the long-term
prudential interests of Bancorp.
Credit Risk Management
2.           Within 60 days of this Agreement, Bancorp shall submit to the
Reserve Bank an acceptable credit risk management plan to address and correct
weaknesses identified by the Reserve Bank in Bancorp’s risk rating process and
to improve the accuracy of assigned credit risk ratings (the “Credit Risk
Management Plan”). The Credit Risk Management Plan shall describe the specific
actions that Bancorp proposes to take, and the timeframes for these actions. The
Credit Risk Management Plan shall, at a minimum, address, consider and include:
(a)           Measures to enhance the internal credit risk rating system so that
it is (i) commensurate with the complexity of lending activities; (ii)
adequately integrated into the institution's overall analysis of capital
adequacy; and (iii) supported by sufficient quantitative analysis;
(b)           strategies to minimize credit losses and reduce levels of problem
assets;
(c)           measures to enhance the accuracy and consistency of loan risk
ratings assigned by loan officers;
(d)           measures to require that all documentation necessary to adequately
assess the current status and quality of each loan is maintained in the loan
files; and
(e)           measures to address weaknesses identified by the Reserve Bank in
problem loan accounting practices, including, but not limited to: loan
reporting, troubled debt restructuring identification process, use of specific
loan loss reserves, and nonaccrual and charge-off practices.
 
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Allowance for Loan and Lease Losses
3.        (a)           Within 60 days of this Agreement, Bancorp shall review
and revise, as appropriate, its consolidated allowance for loan and lease losses
(“ALLL”) methodology to assure that it is consistent with relevant supervisory
guidance, including the Interagency Policy Statements on the Allowance for Loan
and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR
06-17). Bancorp shall submit a description of the methodology to the Reserve
Bank upon adoption.
(b)           Within 60 days of this Agreement, Bancorp shall submit to the
Reserve Bank an acceptable written program to be implemented for determining,
documenting, and recording an adequate consolidated ALLL. The program shall
include policies and procedures to ensure adherence to the consolidated ALLL
methodology and provide for periodic reviews and updates to the consolidated
ALLL methodology, as appropriate. The program shall also provide for a review of
the consolidated ALLL by the board of directors on at least a quarterly calendar
basis. Any deficiency found in the consolidated ALLL shall be remedied in the
quarter it is discovered, prior to the filing of any required regulatory
reports, by additional provisions. The board of directors, acting through the
Audit Committee, shall maintain written documentation of its review, including
the factors considered and conclusions reached by the Bancorp or any nonbank
subsidiary in determining the adequacy of the consolidated ALLL. During the term
of this Agreement, Bancorp shall submit to the Reserve Bank, within 30 days
after the end of each calendar quarter, a written report regarding the board of
directors’ quarterly review of the consolidated ALLL and a description of any
changes to the methodology used in determining the amount of consolidated ALLL
for that quarter.
(c)           Bancorp shall, by the end of the quarter following the receipt of
any
 
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federal report of inspection, or more frequently if warranted, charge off all
assets classified or identified as “loss” unless otherwise approved in writing
by the Reserve Bank.
Capital Plan
4.           Within 15 days of this Agreement, Bancorp shall submit to the
Reserve Bank an acceptable written plan (the “Capital Plan”) to maintain
sufficient capital at Bancorp, on a consolidated basis, and at the Bank, as a
separate legal entity on a stand-alone basis. The Capital Plan shall describe
the specific actions that Bancorp proposes to take, and the timeframes for these
actions. The Capital Plan shall, at a minimum, address, consider, and include:
(a)           The consolidated organization’s and the Bank’s current and future
capital requirements, including Bancorp’s compliance with the Capital Adequacy
Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage
Measure, Appendices A and D of Regulation Y of the Board of Governors of the
Federal Reserve System (the “Board of Governors”) (12 C.F.R. Part 225, App. A
and D) and the applicable capital adequacy guidelines for the Bank issued by the
Bank’s federal regulator;
(b)           the adequacy of Bancorp’s and the Bank’s capital, taking into
account the volume of classified credits, concentrations of credit, ALLL,
current and projected asset growth, and projected net income and retained
earnings;
(c)           enhancements to Bancorp’s stress testing and scenario analysis
practices;
(d)           the source and timing of additional funds necessary to fulfill the
consolidated organization’s and the Bank’s future capital requirements, as well
as the impact that the actions to generate such funds will have on projected net
income and retained earnings;
 
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(e)           supervisory requests for additional capital at the Bank and the
requirements of any supervisory action imposed on the Bank by its federal
regulator; and
(f)           the requirements of section 225.4(a) of Regulation Y of the Board
of Governors (12 C.F.R. § 225.4(a)) that Bancorp serve as a source of strength
to the Bank.
5.           Bancorp shall notify the Reserve Bank in writing, no more than 30
days after the end of any quarter in which any of Bancorp’s or the Bank’s
capital ratios (total risk based, Tier 1 risk-based, or leverage) fall below the
Capital Plan’s minimum ratios. Together with the notification, Bancorp shall
submit an acceptable written plan that details the steps that Bancorp and/or the
Bank will take to increase Bancorp’s and/or the Bank’s capital ratios to or
above the plan’s minimums.
Liquidity and Funds Management
6.           Within 15 days of this Agreement, Bancorp shall submit to the
Reserve Bank an acceptable written plan designed to improve management of the
consolidated entity’s liquidity position and funds management practices (the
“Liquidity Plan”). The Liquidity Plan shall describe the specific actions that
Bancorp proposes to take and the timeframes for these actions. The Liquidity
Plan shall, at a minimum, address, consider, and include:
(a)           Measures to enhance the monitoring and measurement of the
consolidated entity’s liquidity positions, including cash flow projections to
address future needs;
(b)           measures to enhance the consolidated entity’s ability to meet
short-term funding needs, including the maintenance of an adequate liquidity
cushion;
(c)           a longer-term funding plan that includes strategies that do not
rely on U.S. government funding programs or regulatory or supervisory waivers or
exemptions;
 
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(d)           a contingency funding plan that includes adverse scenario planning
and periodic reporting;
(e)           specific liquidity targets and parameters, and the maintenance of
sufficient liquidity to meet contractual obligations and unanticipated demands;
(f)            procedures to ensure discipline in adhering to liquidity targets
and parameters;
(g)           systems to ensure that the consolidated organization's liquidity
risk management process addresses off-balance sheet exposures and funding
alternatives in a contingency liquidity plan; and
(h)           measures to ensure periodic written reports to Bancorp’s board of
directors and senior management on the consolidated entity’s current and
projected liquidity positions, including, but not limited to: (i) a complete
review of the consolidated entity’s liquidity position that includes the
potential impact of demand upon liquidity arising from all contingent exposures;
(ii) an analysis of strategies or steps taken or to be taken to address
variances from targets and parameters; and (iii) a discussion of contingency
plans if actual sources or uses of funds vary materially from projections.
Business Plan
7.           Within 75 days of this Agreement, Bancorp shall submit to the
Reserve Bank a business plan to improve Bancorp’s overall financial condition
(the “Business Plan”). The Business Plan shall, at a minimum, provide for or
describe:
(a)           a comprehensive budget for the remainder of calendar year 2009 and
the calendar year 2010, including income statement and balance sheet
projections;

 
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(b)           the operating assumptions that form the basis for, and adequately
support, major projected income, expense and balance sheet components; and
(c)           a detailed description of any proposed restructuring (including
any sales of lines of business) of Bancorp's activities.
Dividends and Distributions
8.         (a)           Bancorp shall not declare or pay any dividends without
the prior written approval of the Reserve Bank and the Director of the Division
of Banking Supervision and Regulation (the “Director”) of the Board of
Governors.
(b)           Bancorp shall not directly or indirectly take dividends or any
other form of payment representing a reduction in capital from the Bank without
the prior written approval of the Reserve Bank.
(c)           Bancorp and its nonbank subsidiaries shall not make any
distributions of interest, principal or other sums on subordinated debentures or
trust preferred securities without the prior written approval of the Reserve
Bank and the Director.
(d)           All requests for prior written approval shall be received at least
30 days prior to the proposed dividend declaration date, proposed distribution
on subordinated debentures, and required notice of deferral on trust preferred
securities. All requests shall contain, at a minimum, current and projected
information, as appropriate, on Bancorp’s capital, earnings, and cash flow; the
Bank’s capital, asset quality, earnings, and ALLL needs; and identification of
the sources of funds for the proposed payment or distribution. For requests to
declare or pay dividends, Bancorp must also demonstrate that the required
declaration or payment of dividends is consistent with the Board of Governors’
Policy Statement on the
 
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Payment of Cash Dividends by State Member Banks and Bank Holding Companies,
dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page
4-323).
Debt and Stock Redemption
9.        (a)           Bancorp, and any nonbank subsidiary, shall not, directly
or indirectly, incur, increase, or guarantee any debt outside the ordinary
course of business without the prior written approval of the Reserve Bank. All
requests for prior written approval shall contain, but not be limited to, a
statement regarding the purpose of the debt, the terms of the debt, and the
planned source(s) for debt repayment, and an analysis of the cash flow resources
available to meet such debt repayment.
(b)           Bancorp shall not, directly or indirectly, purchase or redeem any
shares of its stock without the prior written approval of the Reserve Bank.
Compliance with Laws and Regulations
10.      (a)           In appointing any new director or senior executive
officer, or changing the responsibilities of any senior executive officer so
that the officer would assume a different senior executive officer position,
Bancorp shall comply with the notice provisions of section 32 of the FDI Act (12
U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12
C.F.R. §§ 225.71 et seq.).
(b)           Bancorp shall comply with the restrictions on indemnification and
severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and
Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R.
Part 359).
Compliance with the Agreement
11.           Within 10 days of this Agreement, Bancorp’ s board of directors
shall appoint a committee (the “Compliance Committee”) to monitor and coordinate
Bancorp’s compliance with
 
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the provisions of this Agreement. The Compliance Committee shall include a
majority of outside directors who are not executive officers or principal
shareholders of Bancorp or the Bank, as defined in sections 215.2(e)(1) and
215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1)
and 215.2(m)(1)). The Compliance Committee shall meet at least monthly, keep
detailed minutes of each meeting, and report its findings to Bancorp’s board of
directors.
Approval and Implementation of Plans and Program
12.      (a)           Bancorp shall submit written plans and a program that are
acceptable to the Reserve Bank as follows: (i) within 15 days of this Agreement,
plans addressing paragraphs 4 and 6; and (ii) within 60 days, a plan and program
addressing paragraphs 2 and 3. Within 75 days of this Agreement, Bancorp shall
submit written plans addressing paragraphs 1 and 7.
(b)           Within 10 days of approval by the Reserve Bank (or submission with
respect to paragraphs 1 and 7), Bancorp shall adopt the plans and program
referred to in paragraph 12(a). Upon adoption, Bancorp shall promptly implement
the plans and program, and thereafter fully comply with them.
(c)           During the term of this Agreement, the plans and program shall not
be amended or rescinded without the prior written approval of the Reserve Bank.
Progress Reports
13.      (a)           Within 30 days after the end of each calendar quarter
following the date of this Agreement, Bancorp shall submit to the Reserve Bank
written progress reports detailing the form and manner of all actions taken to
secure compliance with this Agreement and the results thereof.
 
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(b)           On an ongoing basis, Bancorp shall promptly provide the Reserve
Bank with the following reports as they become available: (i) minutes of the
meetings of Bancorp’s board of directors; (ii) minutes of the meetings of the
audit and risk management committees of Bancorp’s board of directors; (iii)
minutes of the monthly meetings of the asset liability committee; (iv) minutes
of the quarterly meetings of the capital committee; (v) daily cash position
reports; (vi) weekly parent-only cash flow forecasts; (vii) weekly consolidated
cash flow forecasts; (viii) daily liquidity update reports showing client
funding requests and loan/credit collections by business segment, business unit,
and by facility type, ongoing initiatives on new funding and asset sales, and
derivative terminations; monthly reports of debt maturities; (ix) enterprise
risk management reports; (x) rating agency action releases; (xi) reports of all
contacts and discussions with rating agencies; (xii) secured borrowing
facilities reports; (xiii) monthly reports of margin sensitivity analysis; (xiv)
monthly reports of business segment income; (xv) standardized board and board
level committee liquidity risk management reporting packages; and (xvi) monthly
derivative valuation reports.
Communications
14.           All communications regarding this Agreement shall be sent to:

 
(a)
Lance Auer
   
Vice President
   
Federal Reserve Bank of New York
   
33 Liberty Street
   
New York, NY 10045
       
(b)
Robert Ingato
   
Executive V.P., General Counsel and Secretary
   
CIT Group Inc.
   
One CIT Drive
   
Livingston, NJ 07041

 
 
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Miscellaneous
15.           Notwithstanding any provision of this Agreement, the Reserve Bank
may, in its sole discretion, grant written extensions of time to Bancorp to
comply with any provision of this Agreement.
16.           The provisions of this Agreement shall be binding upon Bancorp and
its institution-affiliated parties, in their capacities as such, and their
successors and assigns.
17.           Each provision of this Agreement shall remain effective and
enforceable until stayed, modified, terminated, or suspended in writing by the
Reserve Bank.
18.           The provisions of this Agreement shall not bar, estop, or
otherwise prevent the Board of Governors, the Reserve Bank, or any other federal
or state agency from taking any other action affecting Bancorp, the Bank, any
nonbank subsidiary of Bancorp, or any of their current or former
institution-affiliated parties and their successors and assigns.
19.           Pursuant to Section 50 of the FDI Act (12 U.S.C. § 1831aa), this
Agreement is enforceable by the Board of Governors under section 8 of the FDI
Act (12 U.S.C. § 1818).
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the 12th day of August, 2009.
 
CIT GROUP INC.
 
FEDERAL RESERVE BANK
OF NEW YORK
                 
By:
/s/ Jeffrey M. Peek
   
By:
/s/ William L. Rutledge
    Jeffrey M. Peek       William L. Rutledge    
Chairman and Chief Executive Officer
     
Executive Vice President
 

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