Impact of the Dodd-Frank Wall Street Reform and Consumer Protection on Bank of America

Exposé Écrit pour un Séminaire / Cours , 2010 , 7 Pages , Note: 1,3

Gestion d'entreprise - Banque, Bourse, Assurance

1. Bank of America presentation and major activities,
2. Choice of four factors and explanation,
3. Possible impacts on Bank of America due to the regulatory changes,
4. References.

Inhaltsverzeichnis

1. Bank of America presentation and major activities

2. Choice of four factors and explanation

3. Possible impacts on Bank of America due to the regulatory changes

4. References

1. Bank of America presentation and major activities

Bank of America (BofA) is the largest U.S. Bank^[1] with total assets of $ 2,223,299 Million reported in 2009.^[2] The bank- and financial holding company serves approximately 59 million customers, who are individual consumers, small and middle market businesses, large corporations and governments. BofA has banking subsidiaries and various nonbanking subsidiaries throughout the United States and in selected international markets. The main six business segments are deposits, global card services, home loans & insurance, global commercial banking, global banking & markets, global wealth & investment management.^[3]

2. Choice of four factors and explanation

BofA is a huge banking corporation and might be affected by regulatory changes. The Dodd-Frank Wall Street Reform proposes several regulations. BofA might be affected by the following four issues:

Consumer Protections with Authority and Independence, because it concerns banks e.g., offering financial products and with assets of over $ 10 billion^[4]

Ends Too Big to Fail Bailouts, because BofA received payments from the US treasury and so the act shall avoid financial bailouts, like in 2008 a sum of $ 45 billion^[5]

Transparency & Accountability for Exotic Instruments, because income generating activities like asset-backed securitization or derivatives trading are part of BofA banking actions^[6]

Mortgage Reform, as BofA holds a noteworthy of its assets in mortgages

3. Possible impacts on Bank of America due to the regulatory changes

“The Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed by President Barak Obama and became public law on the 21st of July this year.^[7] Major concepts are the prohibition of banks from making risky bets with their own funds and limitation of the ability of federally insured banks to trade derivatives.^[8] “It will be able to ban practices that are “unfair”, “abusive” or that “take unreasonable advantage” of consumers.”^[9] The Act seems to be hailed as the most sweeping overhaul of US financial regulation since the 1930s.^[10] In fact, it is so sweeping that it will create countless problems and has the almost certain potential to cause a break down in the already fragile bond market, e.g. mortgage rates changing of 75-150 basis points intraday.^[11]

Bank of America was singled out as one of the banks which were mostly affected by the Dodd-Frank Act according to “The Economy News” mid July. This point of view was also reflected in the decline of stock price the same day the American President announced the passing of the Dodd-Frank Act.^[12] On the whole Bank of America has to face an overall amount of $4.3 billion of costs due to financial regulations.^[13] Generally spoken the Dodd-Frank Act will reduce Bank of America’s ability to do proprietary trading and will allow only minimal investments in Hedge Funds and private equity funds. The Bank will also face tougher standards for the capital they are required to set aside to protect itself and its deposits against potential losses.^[14]

BANK OF AMERICA The country's largest bank will be hit hard by the legislation, as credit and debit card rules will undoubtedly take a bite out of profits.

But it has little private equity and proprietary trading business, and the firm has been trimming what exposure it currently has. And thanks to its purchase of Merrill Lynch in 2008, its operations mix is much more diversified than before.^[15]

[...]

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^[1] http://www.ffiec.gov/nicpubweb/nicweb/top50form.aspx

^[2] Annual Report 2009, p. 5

^[3] http://www.reuters.com/finance/stocks/companyProfile?symbol=BAC.N

^[4] Brief summary of the Dodd-Frank Wall Street reform and Consumer Protection Act

^[5] http://news.bbc.co.uk/2/hi/7832484.stm

^[6] https://cdr.ffiec.gov/public/Reports/UbprReport.aspx?rptCycleIds=61%2c60%2c58%2c57%2c56&rptid=283&idrssd=

480228

^[7] http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04173:@@@L&summ2=m&#major%20actions

^[8] http://online.wsj.com/article/SB10001424052748703615104575328020013164184.html?mod=WSJ_hps_

LEADNewsCollection

^[9] The Economist. New York: Sep 23rd 2010

^[10] The Sunday Telegraph. London (UK): Jul 25, 2010. p. 4

^[11] The death knell for brokers? Carl Delmont. The Evening Sun. Hanover, Pa.: Oct 9, 2010.

^[12] http://www.economy-news.co.uk/bank-of-america-corporation-16201007.html

^[13] http://uk.reuters.com/article/idUKTRE68J0IA20100920

^[14] http://www.economy-news.co.uk/bank-of-america-corporation-16201007.html

^[15] The economist. New York. Regulatory Pregame: Laying Bets; [Web Log] SUSANNE CRAIG and ANDREW ROSS SORKIN. New York Times. (Late Edition (East Coast)). New York, N.Y.: Sep 30, 2010. pg. F.1

• Université: San Diego State University
• Note: 1,3
• Auteur: Nicole Tode (Auteur)
• Année de publication: 2010
• Pages: 7
• N° de catalogue: V203059
• ISBN (ebook): 9783656293798
• Langue: anglais
• mots-clé: Dodd-Frank Act, Mortgage Reform, Volcker rule