BofA Kinda Forgot That Structured Notes Mature - Dealbreaker

BofA Kinda Forgot That Structured Notes Mature


Ah, 2009: Heady times at Bank of America, what with Merrill Lynch being dropped (/forced) into their lap and all. Still, it does seem rather a big oversight to have failed to account for the fact that bonds and options, you know, don’t last forever—and then to have missed it for four years and almost $4 billion.

A transition team created a schedule to track cumulative gains and losses on such liabilities, the SEC said, but the schedule didn’t account for the fact that the notes would mature or be redeemed over time. That caused the bank to erroneously strip out certain “realized” losses when calculating capital levels.

But because Brian Moynihan & co. went to the grownups as soon as they realized that they weren’t carrying the one, it’s little more than a strongly-worded letter in their file this time.

The SEC said it was giving the bank credit for cooperating with the investigation….

The bank discovered the error while preparing for a first-quarter regulatory filing, after the earnings announcement on April 16 and as the bank was preparing to file its 10-Q.

SEC Investigation Sheds Light on BofA’s $4 Billion Mistake [WSJ MoneyBeat blog]