Annual report pursuant to Section 13 and 15(d)

Transactions with Bank of America

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Transactions with Bank of America
 12 Months Ended
Dec. 31, 2012
Related Party Transactions [Abstract]  
Transactions with Bank of America
Note 2.  
Transactions with Bank of America
Merrill Lynch has entered into various transactions with Bank of America, including transactions associated with certain sales and trading and financing activities, as well as the allocation of certain shared services.

On November 1, 2012, in connection with an intragroup reorganization involving Bank of America and a number of
its subsidiaries, Merrill Lynch acquired two affiliated companies and their respective subsidiaries from Bank of
America. The acquisition was financed through a capital contribution from Bank of America (see Note 1).

On January 6, 2013, Bank of America entered into an agreement with Fannie Mae ("FNMA") to resolve substantially all outstanding and potential repurchase and certain other claims relating to the origination, sale and delivery of certain residential mortgage loans. As part of the agreement, Bank of America repurchased for $6.6 billion certain residential mortgage loans that had previously been sold to FNMA, which Bank of America valued at less than the purchase price. The majority of such loans are held by Merrill Lynch.
Details on amounts receivable from and payable to Bank of America as of December 31, 2012 and December 31, 2011 are presented below.
Receivables from Bank of America are comprised of:
(dollars in millions)
 
December 31, 2012
 
December 31, 2011
Cash and cash equivalents
$
9,446

 
$
8,681

Cash and securities segregated for regulatory purposes
5,257

 
6,107

Receivables under resale agreements
13,090

 
26,855

Trading assets
409

 
700

Net intercompany funding receivable
16,473

 
11,318

Other receivables
1,155

 
6,284

Total
$
45,830

 
$
59,945

Payables to Bank of America are comprised of:
(dollars in millions)
 
December 31, 2012
 
December 31, 2011
Payables under repurchase agreements
$
556

 
$
22,647

Payables under securities loaned transactions
3,686

 
2,519

Short-term borrowings
925

 
1,450

Deposits
140

 
159

Trading liabilities
509

 
503

Other payables
1,780

 
1,803

Long-term borrowings(1)
1,156

 
2,650

Total
$
8,752

 
$
31,731

 
 
 
 
(1)
Includes $2,578 million of subordinated borrowings from Bank of America as of December 31, 2011 (see Note 12).

Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2012 were $1.6 billion and $2.2 billion, respectively. Net revenues for the year ended December 31, 2012 included $125 million of investment banking revenue from transactions involving Bank of America. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2011 were $1.5 billion and $2.5 billion, respectively. Net revenues for the year ended December 31, 2011 included $322 million of investment banking revenue from transactions involving Bank of America. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2010 were $1.0 billion and $807 million, respectively. Net revenues for the year ended December 31, 2010 included a realized gain of approximately $280 million from the sale of approximately $11 billion of available-for-sale securities, $212 million of investment banking revenue from transactions involving Bank of America, and, as discussed below, a gain of approximately $600 million from the sale of Bloomberg Inc. notes receivable to Bank of America.
Total net revenues related to transactions with Bank of America for the years ended December 31, 2012, December 31, 2011 and December 31, 2010 included intercompany service fee revenues of $986 million, $944 million and $329 million, respectively. Total non-interest expenses related to transactions with Bank of America for the years ended December 31, 2012, December 31, 2011 and December 31, 2010 included intercompany service fee expenses of $1.8 billion, $2.3 billion and $538 million, respectively. Intercompany service fee revenue and service fee expense from Bank of America represents the allocations of certain centralized or shared business activities between Merrill Lynch and Bank of America. Such fees are generally determined in accordance with subsidiary transfer pricing agreements.
A portion of the consideration received from Merrill Lynch's July 2008 sale of its stake in Bloomberg, L.P. to Bloomberg Inc. was notes issued by Bloomberg Inc., the general partner and owner of substantially all of Bloomberg, L.P. The notes represent senior unsecured obligations of Bloomberg Inc. In December 2010, Merrill Lynch sold the Bloomberg Inc. notes to Bank of America at fair value and recorded a gain of approximately $600 million.
Bank of America and Merrill Lynch have entered into certain intercompany lending and borrowing arrangements to facilitate centralized liquidity management. Included in these arrangements is a $50 billion extendible one-year revolving credit facility that allows Bank of America to borrow funds from Merrill Lynch at a spread to LIBOR that is reset periodically and is consistent with other intercompany agreements. The credit facility matures on January 1, 2014 and will automatically be extended by one year to the succeeding January 1st unless Merrill Lynch provides written notice not to extend at least 45 days prior to the maturity date. There were no amounts outstanding at both December 31, 2012 and December 31, 2011 under this credit facility. There is also a short-term revolving credit facility that allows Bank of America to borrow up to an additional $25 billion. Interest on borrowings under the credit facility is based on prevailing short-term market rates. The line of credit matures on February 11, 2014. There was approximately $16.2 billion outstanding at December 31, 2012 and approximately $3.7 billion outstanding at December 31, 2011 under this credit facility. See Note 12 for further information on intercompany financing agreements with Bank of America. In addition, Bank of America has guaranteed the performance of Merrill Lynch on certain derivative transactions (see Note 6). Bank of America has also guaranteed certain debt securities, warrants and/or other certificates and obligations of certain subsidiaries of ML & Co. (see Note 12).