Since the completion of its merger with Merrill Lynch in 2009, Bank of America has been working under a memorandum of understanding with regulators as a result of concerns over corporate governance, risk management and liquidity, according to the Journal's unnamed sources. Those sources say that recent issues in complying with the memorandum could cause regulators to lift the MOU and issue a formal public action.
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Bank of America has seen turnover among managers in key risk areas, with two chief financial and risk officer appointments in the past two years, and a September change of the guard at its wealth management division after the departure of Sallie Krawcheck. In March, the Federal Reserve rejected Bank of America's application to increase its dividend in the second half of 2011 as it tried to follow competitors like JPMorgan(JPM) in returning capital to shareholders.According to the Journal, which cited SNL Financial data, there are currently 1,042 bank and thrift institutions working under formal enforcement actions from regulators since 2007. Among those enforcement actions are cease-and-desist orders involving troubled operations, notices to correct operations, directives on capital and consent orders, among others.The Federal Reserve, which has the ability to issue enforcement actions against U.S. bank holding companies has issued nearly 80 enforcement actions since the start of 2011, according to data from its Web site compiled by TheStreet. Among those is a September action against the mortgage servicing unit of Goldman Sachs(GS) called Litton Loans, which the investment bank sold to Ocwen Financial(OCN) on the day of the notice. In July, JPMorgan, Wells Fargo(WFC) and Royal Bank of Scotland(RBS) were issued enforcement actions from the Fed for violations ranging from improper derivative products sales, the marketing of subprime mortgages and anti-money laundering controls.Content on this page requires a newer version of Adobe Flash Player.For Bank of America, the second largest bank in the U.S. by assets, a potential enforcement action would only add to struggles this year. The stock has fallen nearly 60% year to date and is near post-crisis lows at $5.49. In August, Bank of America's $8.5 billion settlement of bondholder litigation tied to mortgage-backed securities issued by its Countrywide Financial division was challenged by the New York State Attorney General Eric Schneiderman. The bank's shares fell to post-crisis lows on the news and were stabilized by a $5 billion investment by Warren Buffett's Berkshire Hathaway(BRK.A).The settlement was part of $20 billion in provisions that the bank set aside to handle litigation on the mortgages it bought with its $2.5 billion purchase of Countrywide Financial in 2008.Bank of America announced last week it would sell a $6.6 billion stake in China Construction Bank. Bank of America also issued $2.1 billion in common stock to retire preferred and trust-preferred shares worth $2.7 billion. Both moves are aimed at helping Bank of America achieve management's 6.75-7% Basel 3 Tier-1 common capital targets by the end of 2012.--.
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