|9 Months Ended|
Sep. 30, 2011
|Regulatory Requirements [Abstract]|
Note 16. Regulatory Requirements
As a wholly-owned subsidiary of Bank of America, a bank holding company that is also a financial holding company, Merrill Lynch is subject to the oversight of, and inspection by, the Board of Governors of the Federal Reserve System.
Certain U.S. and non-U.S. subsidiaries are subject to various securities and banking regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These regulatory restrictions may impose regulatory capital requirements and limit the amounts that these subsidiaries can pay in dividends or advance to ML & Co. The principal regulated subsidiaries of ML & Co. are discussed below.
As a registered broker-dealer and futures commission merchant, MLPF&S is subject to the uniform net capital requirements of SEC Rule 15c3-1, and the Commodity Futures Trading Commission’s (“CFTC”) Regulation 1.17. MLPF&S has elected to compute the minimum capital requirement in accordance with the “Alternative Net Capital Requirement” as permitted by SEC Rule 15c3-1. At September 30, 2011, MLPF&S’s regulatory net capital as defined by Rule 15c3-1 was $10.8 billion and exceeded the minimum requirement of $864 million by $9.9 billion.
In accordance with the Alternative Net Capital Requirement, MLPF&S is required to maintain tentative net capital in excess of $1 billion, net capital in excess of $500 million, and notify the SEC in the event its tentative net capital is less than $5 billion. As of September 30, 2011, MLPF&S had tentative net capital and net capital in excess of the minimum and notification requirements.
Merrill Lynch International (“MLI”), a U.K. regulated investment firm, is subject to capital requirements of the U.K.’s FSA. Financial resources, as defined, must exceed the total financial resources requirement set by the FSA. At September 30, 2011, MLI’s financial resources were $19.8 billion, exceeding the minimum requirement by $3.2 billion.
Merrill Lynch Japan Securities Co., Ltd. (“MLJS”), a Japan-based regulated broker-dealer, is subject to capital requirements of the Japanese Financial Services Agency (“JFSA”). Net capital, as defined, must exceed 120% of the total risk equivalents requirement of the JFSA. At September 30, 2011, MLJS’s net capital was $1.7 billion, exceeding the minimum requirement by $0.9 billion.
Merrill Lynch International Bank Limited (“MLIB”), an Ireland-based regulated bank, is subject to the capital requirements of the Central Bank of Ireland. MLIB is required to meet minimum regulatory capital requirements under the European Union (“EU”) banking law as implemented in Ireland by the Central Bank of Ireland. At September 30, 2011, MLIB’s financial resources were $14.1 billion, exceeding the minimum requirement by $4.2 billion.
The entire disclosure for a mortgage banking entity related to capital requirements imposed by secondary market investors or state imposed regulatory mandates. The disclosure may include: (1) a description of the minimum net worth requirements related to (a) secondary market investors and (b) state-imposed regulatory mandates; (2) actual or possible material effects of noncompliance; (3) whether the entity is in compliance with the regulatory capital requirements, including (a) the entity's required and actual net worth amounts, (b) factors that may significantly affect adequacy of net worth such as potentially volatile components of capital, qualitative factors, or regulatory mandates; and (4) possible affects of noncompliance on amounts and disclosures in the notes to the financial statements. Servicers with net worth requirements from multiple sources may disclose (1) significant servicing covenants with secondary market investors with commonly defined servicing requirements (2) any other secondary market investor where violation of the requirement would have a significant adverse effect and (3) the most restrictive third party agreement, if not included above. The disclosure may also include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.
Reference 1: http://www.xbrl.org/2003/role/presentationRef