Bank of America : Merrill Lynch International (formerly a subsidiary of ML UK Capital Holdings Limited) June 30, 2024 Interim Report

Published: 2024-10-15 07:47:06 ET BAC

Merrill Lynch International

Pillar 3 Disclosure

For the Quarter Ended 30 June 2024

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

1. Overview and Purpose of Document

This document contains certain Pillar 3 disclosures for the quarter ended 30 June 2024 of Merrill Lynch International ("MLI" or "the Company") and its subsidiaries (together "the Group" or "the MLI Group").

For further information on MLI's risk management objectives and policies, liquidity and asset encumbrance, please refer to the MLI Group annual Pillar 3 disclosure for the year ended 31 December 2023 on BAC's corporate website:

http://investor.bankofamerica.com

1.1 Merrill Lynch International

MLI is a wholly owned subsidiary of Bank of America Europe, Middle East, and Africa ("EMEA") Holdings 2 Limited and Bank of America Jersey Holdings Limited (together, the Jersey Intermediate Holding Companies, or "Jersey IHCs"). MLI's ultimate parent is Bank of America Corporation ("BAC"). MLI is BAC's largest operating subsidiary outside of the US and serves the core financial needs of global corporations and institutional investors.

MLI's head office is in the United Kingdom with branches in Dubai and Qatar along with a representative office in Zurich. MLI is authorised by the PRA and regulated by the FCA and PRA.

As at 30 June 2024, MLI was rated by Fitch Ratings Inc. ("Fitch") (AA / F1+) and Standard & Poor's ("S&P") (A+ / A-1).

1.2 Other Entities

Other entities, although consolidated into the Group, are not separately disclosed in this document on the grounds of materiality.

2. Basis of Preparation

The Basel Capital Accords provide a series of international standards for bank regulation commonly known as Basel I, Basel II and, most recently, Basel III. Basel III was implemented in the European Union ("EU") via the Capital Requirements Directive ("CRD") and the Capital Requirements Regulation ("CRR").

This legislation consists of three pillars. Pillar 1 is defined as 'Minimum Capital Requirement,' Pillar 2 'Supervisory Review Process,' and Pillar 3 'Market Discipline.' The aim of Pillar 3 is to encourage market discipline by allowing market participants to access key pieces of information regarding the capital adequacy of institutions through a prescribed set of disclosure requirements.

MLI disclosures have been designed to meet the current laws, rules and regulations, of which this is primarily made up of the PRA Rulebook, however any reference to an EU regulation, including to Binding Technical Standards and Guidelines, is a reference to the U.K. on-shored version of that regulation, unless otherwise stated.

The information contained in these Pillar 3 disclosures has been prepared in accordance with the requirements of Part Eight of the CRR.

It therefore does not constitute any form of financial statement of MLI or its subsidiaries, or of the wider Enterprise, and as such, is not prepared in accordance with International Financial Reporting Standards ("IFRS") or Financial Reporting Standard 101 'Reduced Disclosure Framework' ("FRS 101"). Therefore the information contained in these disclosures may not be directly comparable with the Annual Report and Financial Statements, and the disclosure is not required to be audited by external auditors.

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

In addition, the report does not constitute any form of contemporary or forward-looking record or opinion on the Group, the Company or the Enterprise. Although the Pillar 3 disclosure is intended to provide transparent information on a common basis, the information contained in this document may not be directly comparable with the information provided by other banks. Any financial information included herein is unaudited.

The basis of consolidation used for the MLI Group for prudential purposes is the same as the consolidation used for accounting purposes. Figures for the Group are presented on a consolidated basis.

This Pillar 3 disclosure is published on BAC's corporate website: http://investor.bankofamerica.com.

3. Disclosure Policy

MLI has adopted a formal policy to comply with the requirements included in the Disclosure (CRR) part of the PRA rulebook, in accordance with Article 431(3). The Merrill Lynch International Pillar 3 Disclosure Policy sets out the internal processes, systems and controls used to verify that the disclosures are appropriate and in compliance with regulatory requirements, and that the disclosures convey MLI's risk profile comprehensively to market participants.

Article 431(3) also requires that at least one member of the management body or senior management shall attest in writing that the disclosures required under the Pillar 3 framework within PRA Rulebook have been made in accordance with the policy and associated internal processes, systems and controls. The written attestation is included below:

Senior Management Attestation

"I attest that the disclosures provided in the MLI Pillar 3 disclosure for the quarter ended 30 June 2024 have been prepared in accordance with the internal processes, systems and controls detailed in the MLI Pillar 3 Disclosure Policy, which has been approved by the MLI Board."

The MLI Pillar 3 Disclosures have been attested by: UK / CEEMEA Chief Financial Officer

Charles Peters

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

4. Key Metrics

The below tables show a summary of the MLI Group's key capital, leverage and liquidity metrics as at 30 June 2024.

Table 1. UK KM1 - MLI Group Key Metrics Template

MLI Group

(USD in Millions)

Q2 2024

Q4 2023

Q2 2023

Available own funds (amounts)

Common Equity Tier 1 (CET1) capital

33,808

33,917

33,699

Tier 1 capital

33,808

33,917

33,699

Total capital

33,808

33,917

33,699

Risk-weighted exposure amounts

Total risk-weighted exposure amount

150,538

142,691

141,611

Capital ratios (as a percentage of risk-weighted exposure amount)

Common Equity Tier 1 ratio (%)

22.46%

23.77%

23.80%

Tier 1 ratio (%)

22.46%

23.77%

23.80%

Total capital ratio (%)

22.46%

23.77%

23.80%

Additional own funds requirements to address risks other than the risk of excessive leverage (as

a percentage of risk-weighted exposure amount)

UK 7a

Additional CET1 SREP requirements (%)

1.67%

1.83%

UK 7b

Additional AT1 SREP requirements (%)

0.56%

0.61%

UK 7c

Additional T2 SREP requirements (%)

0.74%

0.81%

UK 7d

Total SREP own funds requirements (%)

10.97%

11.25%

Combined buffer requirement (as a percentage of risk-weighted exposure amount)

Capital conservation buffer (%)

2.50%

UK 8a

Conservation buffer due to macro-prudential or systemic risk

0.00%

identified at the level of a Member State (%)

Institution specific countercyclical capital buffer (%)

0.58%

0.53%

0.37%

UK 9a

Systemic risk buffer (%)

0.00%

Global Systemically Important Institution buffer (%)

0.00%

UK 10a

Other Systemically Important Institution buffer

0.00%

Combined buffer requirement (%)

3.08%

3.03%

2.87%

UK 11a

Overall capital requirements (%)

14.05%

14.28%

14.12%

CET1 available after meeting the total SREP own funds

11.49%

12.52%

12.54%

requirements (%)

Leverage ratio

Total exposure measure excluding claims on central banks

397,489

337,890

374,400

Leverage ratio excluding claims on central banks (%)

8.51%

10.04%

9.00%

Additional leverage ratio disclosure requirements

14a

Fully loaded ECL accounting model leverage ratio excluding claims

8.51%

10.04%

9.00%

on central banks (%)

14b

Leverage ratio including claims on central banks (%)

8.46%

10.00%

9.00%

14c

Average leverage ratio excluding claims on central banks (%)

8.41%

9.49%

9.09%

14d

Average leverage ratio including claims on central banks (%)

8.38%

9.45%

9.09%

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

14e

Countercyclical leverage ratio buffer (%)

0.20%

0.18%

0.13%

Liquidity Coverage Ratio

Total high-quality liquid assets (HQLA) (Weighted value -average)

33,036

32,097

32,339

UK 16a

Cash outflows - Total weighted value

55,421

49,613

48,407

UK 16b

Cash inflows - Total weighted value

41,857

35,743

33,644

Total net cash outflows (adjusted value)

14,618

14,007

14,763

Liquidity coverage ratio (%)

227.45

230.63

221.41

Net Stable Funding Ratio

Total available stable funding

69,185

68,069

63,747

Total required stable funding

61,759

61,654

57,696

NSFR ratio (%)

112.05

110.44

110.85

In the half year ended Q2 2024, total RWA increased by $7.8bn. This was mainly due to an increase in risk weighted exposure amounts for counterparty credit risk in the period.

The leverage ratio exposure measure increased in the period by $59.6bn. This was primarily driven by an increase in on-balance sheet exposures for securities financing and other assets in the period.

5. Minimum Requirements for Own Funds & Eligible Liabilities

Firms that are material subsidiaries of a non-UK Global Systemically Important Institution ("G-SII") per the PRA Rulebook definition are required to hold a minimum amount of MREL. BAC is a non-UKG-SII and MLI meets the definition of material subsidiary and is therefore subject to this requirement.

MREL resources are comprised of qualifying capital resources and eligible liabilities. In order for liabilities that are not capital resources to qualify as eligible, they must meet certain criteria such as having a minimum residual maturity of at least one year and being subordinated to other operating liabilities.

The MLI Group had $1.5bn of eligible liabilities in issuance at the end of June 2024. Total MREL resources for the MLI Group is equal to Tier 1 capital plus eligible liabilities issued. Table 2 shows key metrics relating to MREL requirements.

Table 2. Key metrics - MREL Requirements

Q2 2024

MLI

(Dollars in Millions)

Group

Total MREL Resources Available

35,308

Total RWA

150,538

MREL as a percentage of RWA

23.45%

Leverage Ratio Exposure Measure

397,489

MREL as a percentage of Leverage Ratio Exposure Measure

8.88%

Excluded Liabilities

340,730

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

The following table provides information on the key features of the capital instruments and eligible liabilities issued by the MLI Group.

Table 3. Template UK CCA: MLI Group main features of regulatory own funds instruments and eligible liabilities instruments

Capital

Instruments

Main Features

CET1

MLI

AT1

Eligible Liability

Issuer

Merrill Lynch International

N/a

Merrill Lynch International

Unique identifier (e.g.

Private Placement

N/a

Private Placement

CUSIP, ISIN or

Bloomberg identifier for

private placement)

Public or private

Private

N/a

Private

placement

Governing law(s) of the

English

N/a

instrument

English

Contractual recognition

N/a

of write down and

conversion powers of

resolution authorities

Yes

Regulatory Treatment

Current treatment

CET1

N/a

Eligible Liability

taking into account,

where applicable,

transitional CRR rules

Post-transitional

CET1

N/a

Eligible Liability

CRR rules

Eligible at

Solo

N/a

Solo & Consolidated

solo/(sub-)consolidated/

solo & (sub-

)consolidated

Instrument type

Ordinary shares with full voting

N/a

Subordinated Loan Non-T2

(types to be specified by

rights

each jurisdiction)

Amount recognised in

$12,432m comprising nominal and

N/a

USD 1,500m

regulatory capital

premium

(currency in million, as of

most recent reporting

date)

Nominal amount of

$1.00

N/a

USD 1,500m

instrument

UK-

Issue price

$1.00 19 Dec 2012

N/a

USD 1,500m

$4.76 18 Nov 2014

UK-

Redemption price

N/a

USD 1,500m

Accounting classification

Shareholders' equity

N/a

Liability - amortised cost

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

Original date of issuance

$6,735m

19 Dec 2012

N/a

20-Mar-24

$1,198m

18 Nov 2014

Perpetual or dated

Perpetual

N/a

Dated

Original maturity

No maturity

N/a

20-Mar-26

date

Issuer call subject to

N/a

Yes

prior supervisory

approval

Optional call date,

N/a

No issuer call date. However, may

contingent call dates and

repay in whole or in part at par on

redemption amount

any date subject to prior

supervisory approval.

Subsequent call

N/a

dates, if applicable

Coupons / Dividends

Fixed or floating

N/a

Floating

dividend/coupon

Coupon rate and any

N/a

SOFR plus 80 bps

related index

Existence of a dividend

N/a

stopper

UK-

Fully discretionary,

Fully discretionary

N/a

Mandatory

20a

partially discretionary or

mandatory (in terms of

timing)

UK-

Fully discretionary,

Fully discretionary

N/a

Mandatory

20b

partially discretionary or

mandatory (in terms of

amount)

Existence of step up

N/a

or other incentive to

redeem

Noncumulative or

Non-cumulative

N/a

Cumulative

cumulative

Convertible or non-

Non-convertible

N/a

Non-convertible

convertible

If convertible,

N/a

conversion trigger(s)

If convertible, fully

N/a

or partially

If convertible,

N/a

conversion rate

If convertible,

N/a

mandatory or optional

conversion

If convertible,

N/a

specify instrument type

convertible into

If convertible,

N/a

specify issuer of

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

instrument it converts

into

Write-down features

N/a

Yes

If write-down,

N/a

BoE as the UK Resolution

write-down trigger(s)

Authority has the authority to

trigger the write down of the

instrument under the contractual

terms if they deem the entity is

failing or likely to fail, or if the BAC

resolution entity enters into

resolution.

If write-down, full

N/a

Fully or Partially

or partial

If write-down,

N/a

Permanent

permanent or temporary

If temporary

N/a

write-down, description

of write-up mechanism

34a

Type of

N/a

Contractual

subordination (only for

eligible liabilities)

UK-

Ranking of the

Equity

N/a

Subordinated Claim

34b

instrument in normal

insolvency proceedings

Position in subordination

Subordinated Loan Non-T2

N/a

Senior Liabilities

hierarchy in liquidation

(specify instrument type

immediately senior to

instrument)

Non-compliant

N/a

transitioned features

If yes, specify non-

N/a

compliant features

37a

Link to the full term and

http://investor.bankofamerica.co

N/a

http://investor.bankofamerica.co

conditions of the

instrument (signposting)

(') Insert 'N/A' if

the question is

not applicable

Merrill Lynch International

Pillar 3 Disclosure for the Quarter Ended 30 June 2024

6. Leverage Ratio

MLI has a minimum leverage ratio capital requirement of 3.25%.

MLI manages its risk of excessive leverage through leverage ratio early warning trigger levels. Limits are calibrated in line with legal entity capacity and ensure that leverage exposure remains within MLI's risk appetite. The MLI Group's leverage ratio is 8.51% as at 30 June 2024. Table 4 shows the MLI Group's key metrics relating to the leverage ratio.

Table 4. Template UK LR2 - LRCom: Leverage ratio common disclosure

Leverage ratio exposures

MLI

Group

Q2 2024

Q1 2024

(Dollars in Millions)

Capital and total exposure measure

Tier 1 capital (leverage)

33,808

33,832

UK-24b

Total exposure measure excluding claims on central banks

397,489

403,488

Leverage ratio

Leverage ratio excluding claims on central banks (%)

8.51%

8.38%

UK-25a

Fully loaded ECL accounting model leverage ratio excluding claims on

8.51%

8.38%

central banks (%)

UK-25c

Leverage ratio including claims on central banks (%)

8.46%

8.34%

Additional leverage ratio disclosure requirements - leverage ratio buffers

Leverage ratio buffer (%)

0.20%

0.18%

UK-27b

Of which: countercyclical leverage ratio buffer (%)

0.20%

0.18%

Additional leverage ratio disclosure requirements - disclosure of mean values

UK-31

Average total exposure measure including claims on central banks

403,759

384,253

UK-32

Average total exposure measure excluding claims on central banks

401,864

382,663

UK-33

Average leverage ratio including claims on central banks

8.38%

8.81%

UK-34

Average leverage ratio excluding claims on central banks

8.41%

8.85%

Disclaimer

Bank of America Corporation published this content on October 15, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on October 15, 2024 at 11:46:49.534.