Borrowings and Deposits

12 Months Ended

Dec. 31, 2011



Note 12.	Borrowings and Deposits

Prior to Merrill Lynch's acquisition by Bank of America, ML & Co. was the primary issuer of Merrill Lynch's unsecured debt instruments. Debt instruments were also issued by certain subsidiaries. Bank of America has not assumed or guaranteed the long-term debt that was issued or guaranteed by ML & Co. or its subsidiaries prior to the acquisition of Merrill Lynch by Bank of America.

Beginning late in the third quarter of 2009, in connection with the update or renewal of certain Merrill Lynch international securities offering programs, Bank of America agreed to guarantee debt securities, warrants and/or certificates issued by certain subsidiaries of ML & Co. on a going forward basis. All existing ML & Co. guarantees of securities issued by those same Merrill Lynch subsidiaries under various international securities offering programs will remain in full force and effect as long as those securities are outstanding, and Bank of America has not assumed any of those prior ML & Co. guarantees or otherwise guaranteed such securities. There were approximately $5.2 billion of securities guaranteed by Bank of America at December 31, 2011.

Following the completion of Bank of America's acquisition of Merrill Lynch, ML & Co. became a subsidiary of Bank of America and established intercompany lending and borrowing arrangements to facilitate centralized liquidity management. Included in these intercompany agreements is a $75 billion one-year revolving unsecured line of credit that allows ML & Co. to borrow funds from Bank of America at a spread to LIBOR that is reset periodically and is consistent with other intercompany agreements. This credit line was renewed effective January 1, 2012 with a maturity date of January 1, 2013. The credit line will automatically be extended by one year to the succeeding January 1st unless Bank of America provides written notice not to extend at least 45 days prior to the maturity date. The agreement does not contain any financial or other covenants. There were no outstanding borrowings against the line of credit at December 31, 2011.

In addition to the $75 billion unsecured line of credit, a $25 billion 364-day revolving unsecured line of credit that allows ML & Co. to borrow funds from Bank of America was established on February 15, 2011. Interest on the line of credit is based on prevailing short-term market rates. The agreement does not contain any financial or other covenants. The line of credit matures on February 12, 2013. There were no outstanding borrowings against the line of credit at December 31, 2011.

Following the merger of BAS into MLPF&S, Bank of America agreed to guarantee the short-term, senior unsecured obligations issued by MLPF&S under its short-term master note program on a going forward basis. During 2011, Merrill Lynch decided to reduce short-term unsecured obligations. At December 31, 2011, there were no longer any borrowings outstanding under this program.

Also in connection with the merger of BAS into MLPF&S, MLPF&S either assumed or established the following agreements:

•

MLPF&S assumed an approximately $1.5 billion subordinated loan agreement with Bank of America, which bears interest based on a spread to LIBOR, and has a scheduled maturity date of December 31, 2013. The loan agreement contains a provision that automatically extends the loan's maturity by one year unless Bank of America provides 13 months written notice not to extend prior to the scheduled maturity date.

•

MLPF&S assumed a $7 billion revolving subordinated line of credit with Bank of America. The subordinated line of credit bears interest based on a spread to LIBOR, and has a scheduled maturity date of October 1, 2013. The revolving subordinated line of credit contains a provision that automatically extends the maturity by one year unless Bank of America provides 13 months written notice not to extend prior to the scheduled maturity date. At December 31, 2011, $1.1 billion was outstanding on the subordinated line of credit.

•

On November 1, 2010, a $4 billion one-year revolving unsecured line of credit that allows MLPF&S to borrow funds from Bank of America was established. Interest on the line of credit is based on prevailing short-term market rates. The credit line will mature on November 1, 2012 and may automatically be extended by one year to the succeeding November 1st unless Bank of America provides written notice not to extend at least 45 days prior to the maturity date. At December 31, 2011, there were no borrowings outstanding on the line of credit.


•	On February 22, 2011, a $15 billion 364-day revolving unsecured line of credit that allows MLPF&S to borrow funds from Bank of America was established. Interest on the line of credit is based on prevailing short-term market rates. The line of credit matures on February 19, 2013. At December 31, 2011, approximately $1.5 billion was outstanding on the line of credit.

The value of Merrill Lynch’s debt instruments as recorded on the Consolidated Balance Sheets does not necessarily represent the amount that will be repaid at maturity. This is due to the following:


•	As a result of the acquisition by Bank of America, all debt instruments were adjusted to fair value on January 1, 2009;


•	Certain debt issuances are accounted for at fair value and incorporate changes in Merrill Lynch’s creditworthiness (see Note 4);


•	Certain structured notes whose coupon or repayment terms are linked to the performance of debt and equity securities, indices, currencies or commodities reflect the fair value of those risks (see Note 4); and


•	Certain debt issuances are adjusted for the impact of fair value hedge accounting (see Note 6).

The tables below exclude Merrill Lynch’s intercompany borrowings from Bank of America, see Note 2 for further information. Total borrowings at December 31, 2011 and December 31, 2010, which are comprised of short-term borrowings, long-term borrowings and junior subordinated notes (related to trust preferred securities), consisted of the following:



(dollars in millions)
	December 31, 2011		December 31, 2010
Senior debt	$	59,583	$	80,130
Senior structured notes	28,523		40,678
Subordinated debt	12,661		11,358
Junior subordinated notes (related to trust preferred securities)	3,600		3,576
Other subsidiary financing	868		617
Debt issued by consolidated VIEs	11,534		11,316
Total	$	116,769	$	147,675

Borrowings and deposits at December 31, 2011 and December 31, 2010, are presented below:



(dollars in millions)
	December 31, 2011		December 31, 2010
Short-term borrowings
Other unsecured short-term borrowings	$	1,112	$	10,606
Short-term debt issued by consolidated VIEs⁽¹⁾	4,939		4,642
Total	$	6,051	$	15,248
Long-term borrowings⁽²⁾
Fixed-rate obligations⁽³⁾	$	60,671	$	64,611
Variable-rate obligations⁽⁴⁾⁽⁵⁾	39,852		57,566
Long-term debt issued by consolidated VIEs⁽¹⁾	6,595		6,674
Total	$	107,118	$	128,851
Deposits
Non-U.S.	$	12,364	$	12,826


(1)	See Note 9 for additional information on debt issued by consolidated VIEs.


(2)	Excludes junior subordinated notes (related to trust preferred securities).


(3)	Fixed-rate obligations are generally swapped to variable rates.


(4)	Variable interest rates are generally based on rates such as LIBOR, the U.S. Treasury Bill Rate, or the Federal Funds Rate.


(5)	Includes structured notes.

See Note 5 for additional information on the fair value of long-term borrowings.

The weighted-average interest rates for borrowings at December 31, 2011 and December 31, 2010 (excluding structured products) were as follows:



	December 31, 2011		December 31, 2010
Short-term borrowings	0.4	%	0.3	%
Long-term borrowings	4.0		3.8
Junior subordinated notes (related to trust preferred securities)	6.9		6.9

Long-Term Borrowings

At December 31, 2011, long-term borrowings mature as follows:



(dollars in millions)
	Amount		Percentage of Total
Less than 1 year	$	23,205	22	%
1 – 2 years	19,958		19
2 – 3 years	18,848		18
3 – 4 years	4,570		4
4 – 5 years	4,124		4
Greater than 5 years	36,413		33
Total	$	107,118	100	%

Certain long-term borrowing agreements contain provisions whereby the borrowings are redeemable at the option of the holder (“put” options) at specified dates prior to maturity. These borrowings are reflected in the above table as maturing at their put dates, rather than their contractual maturities. However, Merrill Lynch believes that a portion of such borrowings will remain outstanding beyond their earliest redemption date.

The maturity of certain structured notes whose coupon or repayment terms are linked to the performance of debt and equity securities, indices, currencies or commodities may be accelerated based on the value of a referenced index or security, in which case Merrill Lynch may be required to immediately settle the obligation for cash or other securities. These notes are included in the portion of long-term debt maturing in less than a year.

Senior and subordinated debt obligations do not contain provisions that could, upon an adverse change in ML & Co.’s credit rating, financial ratios, earnings or cash flows, trigger a requirement for an early payment, additional collateral support, changes in terms, acceleration of maturity, or the creation of an additional financial obligation.

Junior Subordinated Notes (related to trust preferred securities)

Merrill Lynch has created six trusts that have issued preferred securities to the public (“trust preferred securities”). Merrill Lynch Preferred Capital Trust III, IV and V used the issuance proceeds to purchase Partnership Preferred Securities, representing limited partnership interests. Using the purchase proceeds, the limited partnerships extended junior subordinated loans to ML & Co. and one or more subsidiaries of ML & Co. Merrill Lynch Capital Trust I, II and III directly invested in junior subordinated notes issued by ML & Co.

ML & Co. has guaranteed, on a junior subordinated basis, the payment in full of all distributions and other payments on the trust preferred securities to the extent that the trusts have funds legally available. This guarantee and similar partnership distribution guarantees are subordinated to all other liabilities of ML & Co.

The following table summarizes Merrill Lynch’s trust preferred securities as of December 31, 2011.



(dollars in millions)
TRUST	ISSUE DATE	AGGREGATE PRINCIPAL AMOUNT OF TRUST PREFERRED SECURITIES		AGGREGATE PRINCIPAL AMOUNT OF NOTES		AGGREGATE CARRYING VALUE OF NOTES		ANNUAL DISTRIBUTION RATE		STATED MATURITY
ML Preferred Capital Trust III	Jan–1998	$	750	$	900	$	656	7.00	%	Perpetual
ML Preferred Capital Trust IV	Jun–1998	400		480		348		7.12	%	Perpetual
ML Preferred Capital Trust V	Nov–1998	850		1,021		759		7.28	%	Perpetual
ML Capital Trust I	Dec-2006	1,050		1,051		685		6.45	%	Dec–2066⁽¹⁾
ML Capital Trust II	May–2007	950		951		604		6.45	%	Jun–2062⁽²⁾
ML Capital Trust III	Aug–2007	750		751		548		7.375	%	Sep–2062⁽³⁾
Total		$ 4,750⁽⁴⁾		$	5,154	$	3,600


(1)	Merrill Lynch has the option to extend the maturity of the junior subordinated note until December 2086.


(2)	Merrill Lynch has the option to extend the maturity of the junior subordinated note until June 2087.


(3)	Merrill Lynch has the option to extend the maturity of the junior subordinated note until September 2087.


(4)	Includes related investments of $25 million.

Deposits

Deposits at December 31, 2011 and December 31, 2010, are presented below:



(dollars in millions)
	December 31, 2011		December 31, 2010
Non-U.S.
Non-interest bearing	$	1,153	$	917
Interest bearing	11,211		11,909
Total Deposits	$	12,364	$	12,826

The effective weighted-average interest rate for deposits, which includes the impact of hedges, was 0.7% at both December 31, 2011 and December 31, 2010, respectively. The fair value of deposits approximated their carrying value at December 31, 2011 and December 31, 2010.

Other

Merrill Lynch also obtains standby letters of credit from issuing banks to satisfy various counterparty collateral requirements, in lieu of depositing cash or securities collateral. Such standby letters of credit aggregated $2.1 billion and $1.4 billion at December 31, 2011 and December 31, 2010, respectively.

MERRILL LYNCH & CO., INC. 10-K