Bank of America : Financial Report

This document contains certain Pillar 3 disclosures for the quarter ended 30 September 2021 of ML UK Capital Holdings Limited ("MLUKCH"), its sole operating subsidiary Merrill Lynch International ("MLI" or "the Company") and its other non-operating subsidiaries (together "the Group" or "the MLUKCH Group").

MLUKCH's ultimate parent company is Bank of America Corporation ("BAC" or "the Enterprise") and it acts predominantly as the holding company for MLI. In accordance with the Capital Requirements Regulation ("CRR") MLUKCH complies with the Pillar 3 requirements on a consolidated basis.

The information contained herein predominantly relates to MLI as the sole operating subsidiary of MLUKCH. For further information on MLI's risk management objectives and policies, liquidity and asset encumbrance, please refer to the MLUKCH Group annual Pillar 3 disclosure for the year ended 31 December 2020 on BAC's corporate website:

http://investor.bankofamerica.com

The MLUKCH Group is supervised on a consolidated basis in the UK by the Prudential Regulation Authority ("PRA") and the Financial Conduct Authority ("FCA"). The principal activity of MLUKCH is to act as a holding company for MLI. MLUKCH also acts as a holding company for a small number of non-operating subsidiaries.

MLUKCH is not itself a risk taking entity and the risk is booked in its operating subsidiary MLI, where the business is managed.

MLI is a wholly owned subsidiary of MLUKCH. MLI's ultimate parent is BAC. MLI is BAC's largest operating subsidiary outside of the US and serves the core financial needs of global corporations and institutional investors.

MLI's head office is in the United Kingdom with branches in Dubai and Qatar along with a representative office in Zurich. MLI is authorised by the PRA and regulated by the FCA and PRA.

As at 30 September 2021, MLI was rated by Fitch Ratings Inc. ("Fitch") (AA / F1+) and Standard & Poor's ("S&P") (A+ / A-1).

Other entities, although consolidated into the Group, are not separately disclosed in this document on the grounds of materiality.

Figure 1 illustrates MLI's key capital metrics. MLI's Capital Resources consist entirely of Common Equity Tier 1 ("CET1") capital and MLI continues to maintain capital ratios and resources significantly in excess of its minimum requirement.

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The Basel Capital Accords provides a series of international standards for bank regulation commonly known as Basel I, Basel II and, most recently, Basel III. Basel III was implemented in the European Union ("EU") via the Capital Requirements Directive ("CRD") and the Capital Requirements Regulation ("CRR"), collectively known as the Capital Requirements Directive IV. CRR was subsequently amended by the Capital Requirements Regulation 2 ("CRR2"), with the collective CRD IV requirements being amended by Capital Requirements Directive V ("CRD V"). The CRD IV requirements took effect from 1 January 2014. The CRD V was transposed into UK law on 29 December 2020.

This legislation consists of three pillars. Pillar 1 is defined as 'Minimum Capital Requirement,' Pillar 2 'Supervisory Review Process,' and Pillar 3 'Market Discipline.' The aim of Pillar 3 is to encourage market discipline by allowing market participants to access key pieces of information regarding the capital adequacy of institutions through a prescribed set of disclosure requirements.

Following the passing of the European Union (Withdrawal) Act 2018 by the U.K. government, the relevant EU Regulations were brought into U.K. law, and therefore continue to apply following the U.K.'s exit from the European Union. On 16 November 2020, HM Treasury, in conjunction with the PRA and FCA, announced that implementation of those Basel 3 reforms which make up the U.K. equivalent of the outstanding elements of the EU's 2nd Capital Requirements Regulation will be effective from 1 January 2022.

After the U.K.'s exit from the European Union and the end of the transition period on 31 December 2020, MLI and MLUKCH is subject to all EU regulation brought into U.K. law and all disclosure requirements issued by the Bank of England. For the purposes of this disclosure, any reference to an EU regulation, including to a Binding Technical Standard and Guidelines, is a reference to the U.K. version of that regulation, unless otherwise stated.

The information contained in this disclosure has been prepared in accordance with the requirements of Part Eight of the CRR, for the purpose of explaining the basis on which the MLUKCH Group and MLI have prepared and disclosed certain information about the application of regulatory capital adequacy rules and concepts.

It does not constitute any form of financial statement on MLUKCH or its subsidiaries, or of the wider Enterprise, and as such, is not prepared in accordance with International Financial Reporting Standards ("IFRS") or Financial Reporting Standard 101 'Reduced Disclosure Framework' ("FRS 101"). Therefore the information is not directly comparable with the annual financial statements and the disclosure is not required to be audited by external auditors.

In addition, the report does not constitute any form of contemporary or forward looking record or opinion on the Group, the Company or the Enterprise. Although the Pillar 3 disclosure is intended to provide transparent information on a common basis, the information contained in this document may not be directly comparable with the information provided by other banks. Any financial information included herein is unaudited.

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The basis of consolidation used for the MLUKCH Group for prudential purposes is the same as the consolidation used for accounting purposes. Figures for the Group are presented on a consolidated basis. Figures for MLI are presented on a solo basis.

This Pillar 3 disclosure is published on BAC's corporate website: http://investor.bankofamerica.com.

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 - Financial Instruments: Recognition and Measurement that relates to the classification and measurement of financial instruments.

Based on materiality no further disclosures for the transitional impact of IFRS9 are made in this document.

On 26 June 2020, Regulation (EU) 2020/873 (CRR 'quick fix') was published in the Official Journal of the EU, amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic. The CRR 'quick fix' is part of a series of measures taken by European institutions to mitigate the impact of the COVID-19 pandemic on institutions across EU Member States. In addition to the flexibility already provided in the existing rules, the CRR 'quick fix' introduces certain adjustments to the CRR, including temporary measures, intended, inter alia, to enhance credit flows to companies and households, thereby supporting the EU's economy.

Article 468 of CRR 'quick fix' relates to the temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income in view of the COVID-19 pandemic.

This article introduces a temporary treatment that allows institutions to remove from the calculation of their CET1 items, unrealised gains and losses measured at fair value through other comprehensive income, corresponding to exposures to central governments, to regional governments or to local authorities referred to in Article 115(2) CRR and to public sector entities referred to in Article 116(4) CRR, excluding those financial assets that are credit-impaired, during the period from 1 January 2020 to 31 December 2022. This article replaces the current article that was applicable until 31 of December 2017.

Neither MLI nor the MLUKCH Group have chosen to apply the temporary treatment available in Article 468.

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Capital resources represent the amount of regulatory capital available to an entity to cover all risks. Defined under CRR, capital resources are designated into two tiers, Tier 1 and Tier 2. Tier 1 capital consists of CET1 and Additional Tier 1 ("AT1"). CET1 is the highest quality of capital and typically represents equity and audited reserves; AT1 usually represents contingent convertible bonds; Tier 2 capital typically consists of subordinated debt and hybrid debt capital instruments.

Table 1 shows a breakdown of the capital resources of MLI and the Group.

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