Bank of America: Financial Report

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This document contains certain information under Pillar 3 for the quarter ended September 30, 2021 of ML UK Capital Holdings Limited (“MLUKCH”), its only operating subsidiary Merrill Lynch International (“MLI” or “the Company”) and its others. non-operational subsidiaries. (together “the Group” or “the MLUKCH Group”).

The ultimate parent company of MLUKCH is Bank of America Corporation (“BAC” or “the Company”) and it acts primarily as a holding company for MLI. In accordance with the Capital Requirements Regulation (“CRR”), MLUKCH complies with the requirements of Pillar 3 on a consolidated basis.

The information contained in this document mainly concerns MLI as the only operational subsidiary of MLUKCH. For more information on MLI’s risk management objectives and policies, liquidity and asset charges, please refer to the MLUKCH Group Pillar 3 annual publication for the fiscal year ended December 31, 2020 at LAC’s website:

http://investor.bankofamerica.com

The MLUKCH Group is supervised on a consolidated basis in the United Kingdom by the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”). The main activity of MLUKCH is to act as a holding company for MLI. MLUKCH also acts as a holding company for a small number of non-operating subsidiaries.

MLUKCH is not itself a risk-taking entity and the risk is recognized in its operational subsidiary MLI, where the activity is managed.

MLI is a wholly owned subsidiary of MLUKCH. MLI’s ultimate parent is BAC. MLI is BAC’s largest operating subsidiary outside of the United States and serves the primary financial needs of global businesses and institutional investors.

MLI’s head office is in the UK with branches in Dubai and Qatar as well as a representative office in Zurich. MLI is licensed by the PRA and regulated by the FCA and PRA.

As of September 30, 2021, MLI was rated by Fitch Ratings Inc. (“Fitch”) (AA / F1 +) and Standard & Poor’s (“S&P”) (A + / A-1).

The other entities, although consolidated within the Group, are not presented separately in this document for materiality reasons.

Figure 1 illustrates the main measures of MLI’s capital. MLI’s capital resources are made up entirely of Common Equity Tier 1 (“CET1”) capital and MLI continues to maintain capital and resource ratios well above its minimum requirements.

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The Basel Capital Accords provide a series of international standards for banking regulation commonly referred to as Basel I, Basel II and, more recently, Basel III. Basel III was implemented in the European Union (“EU”) via the Capital Requirements Directive (“CRD”) and the Capital Requirements Regulation (“CRR”), collectively known as name of directive on capital requirements IV. The CRR was subsequently amended by Capital Requirements Regulation 2 (“CRR2”), the collective CRD IV requirements being amended by Capital Requirements Directive V (“CRD V”). CRD IV requirements entered into force on January 1, 2014. CRD V was transposed into UK law on December 29, 2020.

This legislation is made up of three pillars. Pillar 1 is defined as “Minimum capital requirement”, Pillar 2 “Prudential review process” and Pillar 3 “Market discipline”. The aim of Pillar 3 is to encourage market discipline by enabling market participants to access key information regarding the capital adequacy of institutions through a prescribed set of disclosure requirements.

Following the enactment of the European Union (Withdrawal) Act 2018 by the UK government, the relevant EU regulations have been incorporated into UK law and therefore continue to apply after leaving the Kingdom. United of the European Union. On November 16, 2020, HM Treasury, in collaboration with the PRA and FCA, announced that the implementation of the Basel 3 reforms which are the UK equivalent of the outstanding elements of the 2nd EU Regulation on the requirements of equity capital will come into effect on January 1, 2022.

Following the UK’s exit from the European Union and the end of the transition period on December 31, 2020, MLI and MLUKCH are subject to all EU regulations transposed into UK law and all disclosure requirements issued by the Bank of England. For the purposes of this disclosure, any reference to an EU regulation, including a binding technical standard and directives, is a reference to the UK version of that regulation, unless otherwise stated.

The information in this disclosure has been prepared in accordance with the requirements of Part Eight of the CRR, with the aim of explaining the basis on which the MLUKCH Group and MLI have prepared and disclosed certain information on the application of the adequacy rules for regulatory capital and concepts.

It does not constitute any form of financial statement on MLUKCH or its subsidiaries, or the company at large, 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 is not directly comparable with the annual financial statements and the disclosure does not need to be audited by external auditors.

Furthermore, the report does not constitute any form of contemporary or prospective recording or opinion on the Group, the Company or the Company. 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 information provided by other banks. All financial information included in this document is unaudited.

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

This Pillar 3 disclosure is posted on LAC’s corporate website: http://investor.bankofamerica.com.

IFRS 9 deals with the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidelines of IAS 39 – Financial Instruments: Recognition and Measurement, which relate to the classification and measurement of financial instruments.

Based on materiality, no other information on the transitional impact of IFRS9 is provided in this document.

On June 26, 2020, Regulation (EU) 2020/873 (CRR ‘quick fix’) was published in the Official Journal of the EU, amending Regulations (EU) No 575/2013 and (EU) 2019/876 in regarding certain response adjustments to the COVID-19 pandemic. The CRR ‘quick fix’ is part of a series of measures taken by European institutions to mitigate the impact of the COVID-19 pandemic on institutions in EU member states. In addition to the flexibility already provided for in the existing rules, the “quick fix” of the CRR introduces certain adjustments to the CRR, including temporary measures, intended, among other things, to improve the flow of credit to businesses and households, thus supporting the EU economy.

Article 468 of the CRR’s “quick fix” concerns the temporary treatment of unrealized gains and losses measured at fair value through other comprehensive income due to the COVID-19 pandemic.

This article introduces a temporary treatment that allows institutions to remove from the calculation of their CET1 elements, unrealized gains and losses measured at fair value through other comprehensive income, corresponding to exposures to central, regional or local governments. referred to in Article 115 (2) of CRR and to public sector entities referred to in Article 116 (4) of CRR, excluding impaired financial assets, during the period from 1 January 2020 to 31 December 2022. This article replaces the current article which was applicable until December 31, 2017.

Neither MLI nor the MLUKCH Group has chosen to apply the temporary treatment provided for in article 468.

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Capital resources represent the amount of regulatory capital available to an entity to cover all risks. Defined under the CRR, capital resources are classified into two levels, level 1 and level 2. Level 1 capital consists of CET1 and additional level 1 (“AT1”). CET1 is the highest quality capital and generally represents equity and audited reserves; AT1 generally represents contingent convertible bonds; Tier 2 capital generally consists of subordinated debt instruments and hybrid debt capital.

Table 1 shows the breakdown of MLI and Group capital resources.

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