UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2011~~2012

Commission file number: 1-7182

MERRILL LYNCH & CO., INC.

(Exact name of Registrant as specified in its charter)



Delaware		13-2740599
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Bank of America Corporate Center 100 N. Tryon Street Charlotte, North Carolina		28255
(Address of principal executive offices)		(Zip Code)

(704) 386-5681
Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:Title of Each Class		Name of Each Exchange on Which Registered
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class		Name of Each Exchange on Which Registered
Trust Preferred Securities of Merrill Lynch Capital Trust I (and the guarantee of the Registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust II (and the guarantee of the Registrant with respect thereto); Trust Preferred Securities of Merrill Lynch Capital Trust III (and the guarantee of the Registrant with respect thereto)		New York Stock Exchange

See the full list of securities listed on the NYSE Arca on the pages directly following this cover.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

_ YES X NO

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

YES X NO

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

X YES NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

X YES NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	Accelerated filer	Non-accelerated filer X	Smaller reporting company
		(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES X NO

As of the close of business on June 30, ~~2011~~2012, there was no voting common equity of the Registrant ("Common Stock") held by non-affiliates. The Registrant has no non-voting Common Stock.

As of the close of business on February 2328, ~~2012~~2013, there were 1,000 shares of Common Stock outstanding, all of which were held by Bank of America Corporation.

The Registrant is a wholly-owned subsidiary of Bank of America Corporation and meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form with a reduced disclosure format as permitted by Instruction I (2).

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Securities registered pursuant to Section 12(b) of the Act and listed on the NYSE® Arca® are as follows:

Strategic Return Notes®

Strategic Return Notes Linked to the Select Ten Index due March 8, 2012

Strategic Return Notes Linked to the Select Ten Index due May 10, 2012

Strategic Return Notes Linked to the Select 10 Index due July 5, 2012

Strategic Return Notes Linked to the Merrill Lynch Factor Model® due November 7, 2012

Strategic Return Notes Linked to the Merrill Lynch Factor Model® due December 6, 2012

NYSE and Arca are registered service marks of NYSE Group, Inc. All other service marks are the property of Bank of America Corporation.

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ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, ~~2011~~2012

TABLE OF CONTENTS

Part I
Item 1. Business	3
Item 1A. Risk Factors	54
Item 1B. Unresolved Staff Comments	21
Item 2. Properties	22
Item 3. Legal Proceedings	22
Item 4. Mine Safety Disclosures	22
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6. Selected Financial Data	23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Introduction	25
Executive Overview	2726
Results of Operations	3229
Off-Balance Sheet Exposures	3532
Funding and Liquidity	4339
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	4743
Item 8. Financial Statements and Supplementary Data	5350
Report of Independent Registered Public Accounting Firm	5350
Consolidated Financial Statements
Consolidated Statements of (Loss) Earnings	54
Consolidated Statements of Earnings (Loss)	51
Consolidated Statements of Comprehensive (Loss) Income	5552
Consolidated Balance Sheets	5653
Consolidated Statements of Changes in Stockholder's Equity	5855
Consolidated Statements of Cash Flows	5956
Notes to Consolidated Financial Statements	6057
Note 1. Summary of Significant Accounting Policies	6057
Note 2. Transactions with Bank of America	7268
Note 3. Segment and Geographic Information	7470
Note 4. Fair Value Disclosures	7571
Note 5. Fair Value of Financial Instruments	9782
Note 6. Derivatives	9884
Note 7. Securities Financing Transactions	~~110~~96
Note 8. Investment Securities	~~111~~97
Note 9. Securitizations and Other Variable Interest Entities (“VIEs”)	~~115~~100
Note 10. Loans, Notes and Mortgages	~~121~~106
Note 11. Goodwill and Intangible Assets	~~125~~109
Note 12. Borrowings and Deposits	~~126~~110
Note 13. Stockholder's Equity and Earnings Per Share	~~130~~114
Note 14. Commitments, Contingencies and Guarantees	~~131~~115
Note 15. Employee Benefit Plans	~~148~~130
Note 16. Employee Incentive Plans	~~156~~138
Note 17. Income Taxes	~~160~~142
Note 18. Regulatory Requirements	~~163~~145
Note 19. Quarterly Information (Unaudited)	~~163~~146
Note 20. Parent Company Information	164
Note 20. Sale of International Wealth Management Businesses and Brokerage Joint Venture Investment	146
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	167
Note 21. Parent Company Information	147
Item 9A. Controls and Procedures	167
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	150
Item 9B. Other Information	168
Item 9A. Controls and Procedures	150
Item 9B. Other Information	151
Part III
Item 10. Directors, Executive Officers and Corporate Governance	~~168~~151
Item 11. Executive Compensation	~~168~~151
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	168

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Item 13. Certain Relationships and Related Transactions, and Director Independence	168
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	151
Item 14. Principal Accountant Fees and Services	168
Item 13. Certain Relationships and Related Transactions, and Director Independence	151
Item 14. Principal Accountant Fees and Services	151
Part IV
Item 15. Exhibits and Financial Statement Schedules	~~170~~153
Signatures	~~171~~154
EX-12
EX-23.1
EX-23
EX-24.1
EX-24
EX-24.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101

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PART I


Item 1.	Business

Merrill Lynch & Co., Inc. (“ML & Co.” and together with its subsidiaries, “Merrill Lynch”, or the “Company”) is a holding company that, through its subsidiaries, is one of the world's leading capital markets, advisory and wealth management companies. The Company was founded in 1914 and became a publicly traded company on June 23, 1971. In 1973, the holding company ML & Co., a Delaware corporation, was created. Through our subsidiaries, we are a leading global ~~trader~~market-maker and underwriter of securities and derivatives across a broad range of asset classes, and we serve as a strategic advisor to corporations, governments, institutions and individuals worldwide. When used in this report, “we”, “us” and “our” may refer to ML & Co. individually, ML & Co. and its subsidiaries, or certain of ML & Co.'s subsidiaries or affiliates.

We are a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”) and meet the requirements to omit certain information from this Form 10-K as permitted by General Instruction I (2) of Form 10-K. We have also provided a brief description of our business activities in Item 1 as permitted by General Instruction I (2).

Pursuant to Accounting Standards Codification (“ASC”) 280, Segment Reporting (“Segment Reporting”), operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The business activities of Merrill Lynch are included within certain of the operating segments of Bank of America. Detailed financial information ~~related~~of the nature that could be used to allocate resources and assess the performance and operations for components of Merrill Lynch, however, is not provided to Merrill Lynch's chief operating decision maker. As a result, Merrill Lynch does not contain any identifiable operating segments under Segment Reporting, and therefore the financial information of Merrill Lynch is presented as a single segment.

The following is a brief discussion of the nature and scope of our activities in ~~2011~~2012.

Capital Markets and Advisory Activities. We conduct sales and trading activities and act as a market maker in securities, derivatives, currencies, and other financial instruments to satisfy client demands. In addition, we distribute fixed income, currency, commodity and equity products, and derivatives. We also provide clients with financing, securities clearing, settlement, and custody services, and engage in select principal investing activities.

We also assist clients in raising capital through underwritings and private placements of equity, debt and related securities, and loan syndications and offer advisory services to clients on strategic issues, valuation, mergers, acquisitions and restructurings.

In November 2010, Banc of America Securities LLC (“BAS”), a wholly-owned broker-dealer subsidiary of Bank of America, merged into Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation. See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information.

Wealth and Investment Management Activities. We provide brokerage, investment advisory and financial planning services, offering a broad range of both proprietary and third-party wealth management products and services globally to individuals, small- to mid-size businesses, and employee benefit plans. We also create and manage wealth management products, including alternative investment products for clients.

At December 31, 2010, we owned an approximately 7% economic interest in BlackRock, Inc. (“BlackRock”), a publicly traded investment management company. In June 2011, we sold our entire economic interest in BlackRock, and therefore as of December 31, 2011 we no longer held an economic interest in BlackRock. See Note 8 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information.

Research. We also provide a variety of research services on a global basis. These services are at the core of the value proposition we offer to institutional and individual investor clients and are an integral component of our product offerings.

For additional information about our business, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

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Regulation

Certain aspects of our business, and the business of our competitors and the financial services industry in general, are subject to extensive regulation by United States (“U.S.”) federal and state regulatory agencies and securities exchanges and by various non-U.S. government agencies or regulatory bodies, securities exchanges, self-regulatory organizations and central banks.

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United States Regulatory Oversight and Supervision

Holding Company Supervision

As a wholly-owned subsidiary of Bank of America, a bank holding company that is also a financial holding company, we are subject to the oversight of, and inspection by, the Board of Governors of the Federal Reserve System (the “Federal Reserve”).

Broker-Dealer Regulation

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), Merrill Lynch Professional Clearing Corp. (“ML Pro”) and certain other subsidiaries of ML & Co. are registered as broker-dealers with the Securities Exchange Commission (“SEC”) and, as such, are subject to regulation by the SEC and by self-regulatory organizations, such as the Financial Industry Regulatory Authority. Certain of our subsidiaries and affiliates, including MLPF&S, are registered as investment advisors with the SEC.

Our subsidiaries that are broker-dealers registered with the SEC are subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (“Exchange Act”) which is designed to measure the general financial condition and liquidity of a broker-dealer. Under this rule, these entities are required to maintain the minimum net capital deemed necessary to meet broker-dealers’ continuing commitments to customers and others. Under certain circumstances, this rule limits the ability of such broker-dealers to allow withdrawal of such capital by ML & Co. or other Merrill Lynch subsidiaries. Additional information regarding certain net capital requirements is in Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Financial Reform Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”) was signed into law. As a result of the Financial Reform Act, several significant regulatory developments occurred in ~~2011~~2012, and additional regulatory developments may occur in ~~2012~~2013 and beyond. The Financial Reform Act has ~~had,~~impacted and will continue to ~~have, a significant and negative~~ impact on our earnings through revenue reductions, higher costs and imposition of new restrictions on us. For a description of significant developments, see “Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview - Other Events - Financial Reform Act” in Part II, Item 7 of this Form 10-K.

Non-U.S. Regulatory Oversight and Supervision

Our business is also subject to extensive regulation by various non-U.S. regulators including governments, securities exchanges, central banks and other regulatory bodies. Certain of our subsidiaries are regulated as broker-dealers under the laws of the jurisdictions in which they operate. Subsidiaries engaged in banking and trust activities outside the U.S. are regulated by various government entities in the particular jurisdiction where they are chartered, incorporated and/or conduct their business activities. In some cases, the legislative and regulatory developments outside the U.S. applicable to these subsidiaries may have an impact on our business and results of operations. Our financial services operations in the United Kingdom (“U.K.”) are subject to regulation by and supervision of the Financial Services Authority (the “FSA”). In July of 2010, the U.K. proposed abolishing the FSA and replacing it with the Financial Policy Committee within the Bank of England (the “FPC”) and two new regulators, the Prudential Regulatory Authority (the “PRA”) and the Consumer Protection and Markets Authority (the “CPMA”). Under ~~Our~~the proposal, our U.K. regulated entities will be subject to the supervision of the FPC and the PRA for prudential matters and the CPMA for conduct of business matters. The new financial regulatory structure is ~~intended~~scheduled to be informally ~~place~~established byon ~~the~~April ~~end~~1, ~~of 2012~~2013. We continue to monitor the development and potential impact of this regulatory restructuring.


Item 1A.	Risk Factors

In the course of conducting our business operations, we are exposed to a variety of risks, some of which are inherent in the financial services industry and others of which are more specific to our own businesses. The discussion below addresses the most significant factors of which we are aware that could affect our businesses,

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~~Item~~operations, 1Aand financial condition. ~~Risk~~Additional ~~Factors~~factors that could affect our financial condition and operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements.” However, other factors not discussed below or elsewhere in this Annual Report on Form 10-K could also adversely affect our businesses, operations, and financial condition. Therefore, the risk factors below should not be considered a complete list of potential risks that we may face.

InAny ~~the~~risk ~~course~~factor ofdescribed ~~conducting~~in ~~our~~this ~~business~~Annual ~~operations,~~Report weon ~~are~~Form ~~exposed~~10-K toor ~~a variety of risks, some of which are inherent~~ in ~~the~~any ~~financial services industry and others~~ of ~~which are more specific to~~ our ~~own~~other ~~businesses.~~SEC ~~The~~filings ~~following discussion addresses the most significant factors that~~ could ~~affect~~by ~~our businesses~~itself, ~~operations,~~or ~~and~~together ~~financial~~with ~~condition.~~other ~~Additional~~ factors, ~~that~~materially ~~could~~adversely affect our ~~financial~~liquidity, ~~condition~~cash ~~and~~flows, ~~operations~~competitive ~~are~~position, ~~discussed~~business, inresults ~~“Management’s Discussion and Analysis~~ of ~~Financial Condition and Results of Operations — Forward-Looking Statements.” However, other factors could also adversely affect our businesses,~~ operations, and financial condition. ~~Therefore, the risk factors below should not be considered a complete list of potential risks that we may face.~~

General Economic and Market Conditions Risk

Our businesses and results of operations ~~have been, and~~ may ~~continue to~~ be, ~~materially and~~ adversely affected by the U.S. and international financial markets and economic conditions generally. Our businesses and results of operations are ~~materially~~ affected by the financial markets and general economic conditions in the U.S. and abroad, including factors such as the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of capital and credit, investor sentiment and confidence in the financial markets, European sovereign debt risks and the strength of the U.S. economy and the non-U.S. economies in which we operate. The deterioration of any of these conditions ~~can~~could adversely affect our business and securities portfolios, our level of charge-offs and provision for credit losses, the carrying value of our deferred tax assets, our capital levels and liquidity and our results of operations.

~~Although~~Continued ~~the U.S. economy continued its modest recovery in 2011,~~ elevated unemployment, under-employment and household debt, along with continued stress in the consumer real estate market and certain commercial real estate markets in the U.S., pose challenges for domestic economic performance and the financial services industry. The sustained high unemployment rate and the lengthy duration of unemployment have directly impaired consumer finances and pose risks to the financial services industry. Continued ~~The~~uncertainty ~~U.S.~~in the housing ~~market~~markets ~~remains weak~~ and elevated levels of distressed and delinquent mortgages pose further risks to the housing market. ~~In addition, the public perception of certain financial services firms and practices appeared to decline during 2011.~~ The current environment of heightened scrutiny of financial institutions has resulted in increased public awareness of and sensitivity to financial services industry fees and practices. Each of these factors may adversely affect our fees and costs.

Liquidity Risk

Liquidity risk is the potential inability to meet our contractual and contingent financial obligations, on- or off-balance sheet, as they become due.

Adverse changes to Bank of America’s or our credit ratings from the major credit rating agencies could ~~have a material adverse effect on our liquidity, cash flows, competitive position, financial condition and results of operations by~~ significantly ~~limiting~~limit our access to funding or the capital markets, ~~increasing~~increase our borrowing costs, or ~~triggering~~trigger additional collateral or funding requirements. Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including over-the-counter (“OTC”) derivatives.

Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings and other securities, including asset securitizations. Following the acquisition of Merrill Lynch by Bank of America, the major credit rating agencies have indicated that the primary drivers of Merrill Lynch's credit ratings are Bank of America's credit ratings. Bank of America's credit ratings are subject to ongoing review by the rating agencies, which consider a number of factors, including Bank of America's financial strength, performance, prospects and operations as well as factors not under Bank of America's control.

On June 21, 2012, Moody's Investors Service, Inc. ("Moody's") completed its previously-announced review for possible downgrade of financial institutions with global capital markets operations, downgrading the ratings of 15 banks and securities firms, including the ratings of Bank of America and ML & Co. Bank of America's and ML &

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~~On December 15, 2011, Fitch Ratings ("Fitch") downgraded Bank of America's and ML &~~ Co.'s long-term ~~and short-term~~ debt ratings aswere ~~a result of Fitch's decision to lower its “support floor” for systemically important U.S. financial institutions. On November 29, 2011, Standard & Poor's Ratings Services ("S&P")~~ downgraded ~~Bank~~one ofnotch ~~America's and ML & Co.'s long-term and short-term debt ratings~~ as apart ~~result~~ of ~~S&P's~~this ~~implementation~~action. Each of ~~revised~~the ~~methodologies~~three ~~for~~major ~~determining~~rating ~~Banking~~agencies ~~Industry~~downgraded ~~Country~~the ~~Risk Assessments and bank~~ ratings~~. On~~ ~~September~~of ~~21, 2011, Moody's Investors Service, Inc. ("Moody's") downgraded~~ Bank of America's and ML & Co.'s ~~long-term~~in ~~and~~late ~~short-term debt ratings as a result of Moody's lowering the amount of uplift for potential U~~2011.S. government support it incorporates into ratings. On February 15, 2012, Moody's placed Bank of America's long-term debt ratings on review for possible downgrade as part of their review of financial institutions with global capital markets operations. Any adjustment to Bank of America's (and consequently, our) ratings will be determined based on Moody's review; however, the agency offered guidance that downgrades to Bank of America's ratings, if any, would likely be limited to one notch.

Currently, Bank of America's and ML & Co.'s long-term/short-term senior debt ratings and outlooks expressed by the rating agencies are as follows: ~~Baa1~~Baa2/P-2 (negative) by Moody's; A-/A-2 (negative) by Standard & Poor's Ratings Services (“S&P”); and A/F1 (stable) by Fitch Ratings (“Fitch”). The rating agencies could make further adjustments to Bank of America's (and consequently, our) credit ratings at any time. There can be no assurance that additional downgrades will not occur.

A further reduction in certain of our credit ratings ~~may~~could ~~have~~negatively aaffect ~~material adverse effect on~~ our liquidity, access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. If Bank of America’s or Merrill Lynch’s (including our bank's or broker dealer subsidiaries') short-term credit ratings were downgraded by one or more levels, we may suffer the potential loss of access to short-term funding sources such as repurchase agreement financing and/or ~~the~~increased ~~effect on our incremental~~ cost of funds ~~and earnings could be material~~.

In addition, under the terms of certain OTC derivative contracts and other trading agreements, in the event of a further downgrade of the credit ratings of ML & Co. or certain subsidiaries, counterparties to those agreements may require ML & Co. or certain subsidiaries to provide additional collateral, terminate these contracts or agreements, or provide other remedies. At December 31, ~~2011~~2012, if the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the amount of additional collateral contractually required by derivative contracts and other trading agreements would have been approximately $0.4 billion. If the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, approximately $04.30 billion in additional incremental collateral would have been required.

Also, if the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the derivative liability that would be subject to unilateral termination by counterparties as of December 31, ~~2011~~2012 was $01.59 billion, against which $01.32 billion of collateral ~~had~~has been posted. If the rating agencies had downgraded their long-term debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, the derivative liability that would be subject to unilateral termination by the counterparties as of December 31, ~~2011~~2012 was an incremental $31.53 billion, against which $30.47 billion of collateral ~~had~~has been posted.

While certain potential impacts are contractual and quantifiable, the full consequences of a credit ratings downgrade to a financial institution are inherently uncertain, as they depend upon numerous dynamic, complex and inter-related factors and assumptions, including whether any downgrade of a firm's long-term credit ratings precipitates downgrades to its short-term credit ratings, and assumptions about the potential behaviors of various customers, investors and counterparties.

For a further discussion of our liquidity matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funding and Liquidity.”

~~Our~~If ~~liquidity,~~we ~~cash flows, financial condition and results of operations, and competitive position may be significantly adversely affected by the inability of us~~ or Bank of America are unable to access the capital markets or ifour ~~there~~borrowing iscosts an increase, in our ~~borrowing~~liquidity ~~costs~~and competitive position will be negatively affected. Liquidity is essential to our business. We fund our assets primarily with a mix of secured and unsecured liabilities through a globally coordinated funding strategy with Bank of America. We have established intercompany lending and borrowing arrangements to facilitate centralized liquidity management. As a result, our liquidity risk is derived in large part from Bank of America’s liquidity risk. Bank of America’s and our liquidity could be adversely affected by any inability to access the capital markets; illiquidity or volatility in the capital markets; unforeseen outflows of cash, including customer deposits, funding for commitments and contingencies; the ability to sell assets on favorable terms; increased liquidity requirements on our banking or nonbanking subsidiaries imposed by their home countries; or negative perceptions about Bank of America’s and our short- or long-term business prospects, including downgrades of credit ratings. Several of these factors may arise due to circumstances that neither we nor Bank of America may be able to control, such as a general market disruption, negative views about the financial services industry generally, changes in the regulatory environment, actions by credit rating agencies or an operational problem that affects third parties, us or Bank of America.

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~~result,~~Our ~~our~~and ~~liquidity risk is derived in large part from~~ Bank of America’s ~~liquidity~~cost ~~risk. Bank~~ of ~~America’s~~obtaining ~~and~~funding ~~our~~is ~~liquidity~~directly ~~could~~related beto ~~significantly~~prevailing ~~adversely~~market ~~affected~~interest byrates anand ~~inability~~ to ~~access~~credit ~~the~~spreads. ~~capital~~Credit ~~markets;~~spreads ~~illiquidity~~are orthe ~~volatility~~amount in ~~the~~excess ~~capital~~of ~~markets;~~the ~~unforeseen~~interest ~~outflows~~rate of ~~cash,~~U.S. Treasury ~~including customer deposits~~securities, ~~funding~~or ~~for~~other ~~commitments~~benchmark ~~and~~securities, ~~contingencies;~~of ~~the~~a ~~ability~~similar tomaturity ~~sell~~that ~~assets~~we ~~on favorable terms; increased liquidity requirements on our banking~~ or ~~nonbanking subsidiaries imposed by their home countries; or negative perceptions about~~ Bank of America’s ~~and~~need ~~our~~to ~~short-~~pay orto ~~long-term~~funding ~~business~~providers. ~~prospects,~~Increases ~~including~~in ~~downgrades~~interest ofrates ~~credit~~and ~~ratings.~~such ~~Several~~credit ofspreads ~~these~~can ~~factors~~significantly ~~may~~increase ~~arise~~the ~~due~~cost toof ~~circumstances~~funding ~~that~~for ~~neither~~us weand ~~nor~~ Bank of America. ~~may~~Changes bein ~~able~~credit tospreads ~~control,~~are ~~such~~market-driven asand amay ~~general~~be ~~market~~influenced ~~disruption,~~by ~~negative~~market ~~views~~perceptions ~~about~~of the ~~financial~~creditworthiness ~~services~~of ~~industry~~us ~~generally,~~and ~~changes~~Bank inof ~~the~~America. ~~regulatory~~Changes ~~environment,~~to ~~actions~~interest byrates and credit ~~rating~~spreads ~~agencies~~occur orcontinuously anand ~~operational~~may ~~problem~~be ~~that~~unpredictable ~~affects~~and ~~third~~highly ~~parties, us or Bank of America~~volatile.

Our and Bank of America’s cost of obtaining funding is directly related to prevailing market interest rates and to credit spreads. Credit spreads are the amount in excess of the interest rate of U.S. Treasury securities, or other benchmark securities, of the same maturity that we or Bank of America need to pay to funding providers. Increases in interest rates and such credit spreads can significantly increase the cost of funding for us and Bank of America. Changes in credit spreads are market-driven and may be influenced by market perceptions of the creditworthiness of us and Bank of America. Changes to interest rates and credit spreads occur continuously and may be unpredictable and highly volatile.

For additional information about our liquidity, including credit ratings and outlooks, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funding and Liquidity.”

Our dependence upon funds from our subsidiaries and our parent could adversely impact our liquidity. ML & Co. is a holding company that is a separate and distinct legal entity from its parent, Bank of America, and our broker-dealers and other subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including ML & Co. For instance, ML & Co. depends on dividends, distributions and borrowings or other payments from its subsidiaries and may depend in large part on financing from Bank of America to fund payments on our obligations, including debt obligations. Bank of America may, in some instances, be unable to provide us with the funding we need to fund payments on our obligations. Many of our subsidiaries, including our broker-dealer subsidiaries, are subject to laws that restrict dividend payments to ML & Co. In addition, our broker-dealer subsidiaries are subject to restrictions on their ability to lend or transact with affiliates and to minimum regulatory capital and liquidity requirements, as well as restrictions on their ability to use funds deposited with them in brokerage accounts to fund their businesses. Additional restrictions on related party transactions, increased capital and liquidity requirements and additional limitations on the use of funds on deposit in brokerage accounts, as well as lower earnings, can reduce the amount of funds available to meet the obligations of ML & Co. and even require ML & Co. to provide additional funding to such subsidiaries. Regulatory action of that kind could impede access to funds we need to make payments on our obligations. In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. For additional information about regulatory capital requirements and limitations on our subsidiaries' ability to pay dividends, see Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Mortgage and Housing Market-Related Risk

WeOur ~~have~~mortgage ~~been,~~loan ~~and~~repurchase ~~expect~~obligations toor ~~continue~~claims tofrom ~~be,~~third ~~required~~parties tocould ~~repurchase~~result ~~mortgage~~in ~~loans~~additional ~~and/or~~material ~~reimburse~~losses. In ~~whole~~connection ~~loan~~with ~~buyers,~~residential ~~Fannie~~mortgage ~~Mae~~loans ~~("FNMA")~~sold ~~and~~directly ~~Freddie~~to ~~Mac~~government ~~(collectively,~~sponsored enterprises (the "GSEs"), and ~~monolines~~residential ~~for~~mortgage ~~losses~~loans ~~due~~sold to ~~claims~~investors ~~related~~other tothan GSEs as whole loans or private-label securitizations, Merrill Lynch and certain of its subsidiaries made various representations and warranties, ~~made~~breaches of which may result in ~~connection~~a ~~with~~requirement ~~sales~~that ofwe ~~residential~~repurchase the mortgage~~-backed~~ ~~securities~~loans ~~and~~or otherwise make whole or provide other ~~loans~~remedies to counterparties. For example, Merrill Lynch and ~~have~~certain ~~received~~of ~~similar~~its ~~claims~~subsidiaries, including ~~and~~First ~~may~~Franklin ~~receive~~Financial ~~additional~~Corporation ~~claims~~("First Franklin"), ~~from~~sold ~~private-label~~approximately ~~securitization~~$132 ~~investors~~billion ~~and~~in ~~private-label~~original ~~securitization~~principal ~~trustees,~~balance ~~monolines~~of ~~and~~such ~~others.~~loans Weoriginated ~~have~~from ~~recorded~~2004 ~~provisions~~to ~~for~~2008 ~~certain~~(primarily ofsubprime ~~these~~and ~~exposures~~alt-A) through private-label securitizations or whole loan sales. ~~However,~~Most of the ~~ultimate~~loans ~~resolution~~sold ofin ~~these~~the ~~exposures~~form ~~could~~of ~~have~~whole aloans ~~material~~were ~~adverse~~subsequently ~~effect~~pooled oninto ~~our~~private-label ~~cash~~securitizations ~~flows,~~sponsored ~~financial~~by ~~condition~~the ~~and~~third-party ~~results~~buyer of ~~operations~~the whole loans. In For ~~connection~~the ~~with~~outstanding ~~residential~~balance of these loans ~~sold~~as toof ~~investors~~December ~~other~~31, ~~than~~2012 ~~the~~and ~~GSEs~~December as31, ~~well~~2011, assee toManagement's ~~the~~Discussion ~~GSEs,~~and ~~Merrill~~Analysis ~~Lynch~~of Financial Condition and ~~certain~~Results of ~~its~~Operations - ~~subsidiaries~~Off-Balance ~~made~~Sheet ~~various~~Exposures - ~~representations~~Representations and ~~warranties.~~Warranties ~~Breaches~~- ofExperience ~~these~~with ~~representations~~Non-GSE ~~and~~Investors” ~~warranties~~in ~~may~~Part II, ~~result~~Item 7 inof athis ~~requirement~~Form 10-K. In ~~that~~addition, weMerrill ~~repurchase~~Lynch and First Franklin securitized first-lien residential mortgage loans, orgenerally ~~indemnify~~in orthe ~~provide~~form ~~other~~of ~~remedies~~mortgage-backed tosecurities ~~counterparties~~("MBS") guaranteed by the GSEs.

At December 31, 2012, the total notional amount of our unresolved representations and warranties repurchase claims from all sources totaled approximately $6.0 billion compared with $1.3 billion at December 31, 2011. The total amount of our recorded liability related to representations and warranties repurchase exposures was $2.0 billion at December 31, 2012. We currently estimate that the range of possible loss for representations and warranties exposures could be up to $1.1 billion over accruals at December 31, 2012. This range of possible loss does not represent a probable loss. For information concerning the changes to our liability for representations and

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(collectively, "repurchases"). Merrill Lynch, including First Franklin Financial Corporation ("First Franklin"), sold loans originated from 2004 to 2008 (primarily subprime and alt-A) with an original principal balance of $132 billion through private-label securitizations or whole loan sales that were subject to representations and warranties ~~liabilities.~~recorded ~~Most of the loans sold~~ in ~~the~~2012 ~~form~~and of2011 ~~whole~~for ~~loans~~our ~~were~~repurchase ~~subsequently~~exposure ~~pooled~~on ~~into~~ private-label securitizations ~~sponsored by the third-party buyer of the whole loans. For the outstanding balance of these loans as of December 31~~, ~~2011 and December 31, 2010,~~ see ~~Management's~~Note 14 ~~Discussion~~to ~~and~~the ~~Analysis~~Consolidated of Financial ~~Condition~~Statements ~~and Results of Operations - Off-Balance Sheet Exposures - Representations and Warranties - Experience with Non-GSE Investors”~~ in Part II, Item 78 of this Form 10-K. In ~~addition, Merrill Lynch and First Franklin securitized first-lien residential mortgage loans, generally in the form of mortgage-backed securities ("MBS") guaranteed by the GSEs.~~

~~The~~Our ~~amount~~estimated liability and range of ~~our~~possible ~~total~~loss ~~outstanding~~for ~~repurchase~~representations ~~claims~~and ~~from~~warranties ~~all~~exposures ~~sources~~is ~~totaled~~based ~~approximately~~on ~~$1.3~~currently ~~billion~~available atinformation ~~December~~and 31is necessarily dependent on, ~~2011.~~and ~~The~~limited ~~total~~by, ~~amount~~a number of factors, including our ~~recorded~~historical claims and settlement experience and the experience of our affiliates with non-GSE counterparties, projections of future defaults and, for private-label securitizations, the implied repurchase experience based on the BNY Mellon Settlement (as defined below), as well as significant judgment and a number of assumptions that are subject to change, including the assumption that the conditions to the BNY Mellon Settlement are satisfied. As a result, our liability and estimated range of possible loss related to our representations and warranties ~~repurchase~~exposures ~~exposure~~may ~~was~~materially ~~$2.8~~change ~~billion~~in atthe ~~December~~future ~~31,~~based ~~2011~~on factors beyond our control. ~~For~~Future ~~information~~provisions ~~concerning~~and/or ~~the~~estimated ~~provisions~~ranges ~~recorded~~of inpossible ~~2011~~loss for representations and ~~2010~~warranties ~~for~~may be significantly impacted if actual experiences are different from our ~~repurchase~~assumptions ~~exposure~~in onour ~~private-label~~predictive ~~securitizations~~models, ~~see~~including, ~~Note 14~~without tolimitation, the ~~Consolidated~~ultimate ~~Financial~~resolution ~~Statements~~of inthe ~~Part II~~BNY Mellon Settlement, ~~Item 8~~estimated repurchase rates, economic conditions, home prices, consumer and counterparty behavior, and a variety of ~~this~~judgmental ~~Form 10-K~~factors. In addition, we have not recorded any representations and warranties liability for certain private-label securitizations sponsored by whole-loan investors, where we have little to no claim experience.

~~Our~~Adverse ~~estimated~~developments ~~liability and range of possible loss~~ with respect to ~~non-GSE~~one ~~exposures~~or ismore ~~necessarily~~of ~~dependent~~the ~~on,~~assumptions ~~and~~underlying ~~limited~~the ~~by,~~liability ~~our~~for ~~historical~~representations ~~claims~~ and ~~settlement~~warranties ~~experience~~ and the ~~experience~~corresponding ofestimated ~~our~~range ~~affiliates~~of ~~with~~possible ~~non-GSE~~loss ~~counterparties~~could ~~and~~result ~~may~~in ~~materially~~significant ~~change~~increases into ~~the~~ future ~~based on factors beyond our control. Future~~ provisions and/or the estimated ~~ranges~~range of possible loss. For ~~for~~example, ~~non-GSE representations and warranties may be significantly impacted~~ if ~~actual~~courts, ~~experiences are different from our assumptions~~ in ~~our predictive models, including, without limitation, those regarding~~ the ~~ultimate~~context ~~resolution~~ of ~~the~~claims ~~Bank~~brought ofby ~~New~~private-label ~~York~~securitization ~~Mellon settlement~~trustees, ~~estimated~~were ~~repurchase~~to ~~rates,~~disagree ~~economic~~with ~~conditions,~~our ~~home~~interpretation ~~prices,~~that ~~consumer~~the ~~and~~underlying ~~counterparty~~agreements ~~behavior,~~require ~~and~~ a ~~variety~~claimant ofto ~~judgmental~~prove ~~factors. In~~that ~~addition,~~the ~~we have not recorded any~~ representations and warranties ~~liability~~breach ~~for~~was ~~certain~~the ~~potential~~cause ~~monoline~~of ~~exposures~~the ~~and~~loss, ~~certain~~it ~~potential~~could ~~whole~~significantly ~~loan~~impact ~~exposures. We currently estimate that~~ the estimated range of possible loss. Additionally, ~~related~~if torecent ~~non-GSE~~court ~~representations~~rulings ~~and~~related ~~warranties~~to ~~exposure~~monoline ~~as of December 31~~litigation, ~~2011~~including ~~could~~one berelated up to ~~$0.5~~an ~~billion~~affiliate ~~over~~of ~~existing~~ours, ~~accruals. This~~that ~~estimated~~have ~~range~~allowed sampling of ~~possible~~loan ~~loss~~files ~~for~~instead ~~non-GSE~~of ~~representations~~requiring ~~and~~a ~~warranties~~loan-by-loan ~~does~~review ~~not~~to ~~represent~~determine if a ~~probable~~representations ~~loss,~~ and iswarranties ~~based~~breach onhas ~~currently available information~~occurred, ~~significant~~are ~~judgment,~~followed ~~and~~generally aby ~~number~~the ofcourts ~~assumptions~~in ~~that~~other ~~are~~monoline ~~subject~~litigation, toprivate-label ~~change,~~securitization ~~including~~counterparties ~~the~~may ~~assumption~~view ~~that~~litigation ~~the~~as ~~conditions~~a ofmore ~~the~~attractive ~~BNY~~alternative ~~Mellon~~compared ~~Settlement~~to ~~are~~loan-by-loan ~~satisfied~~review.

Adverse developments with respect to one or more of the assumptions underlying the liability for non-GSE representations and warranties and the corresponding estimated range of possible loss could result in significant increases to future provisions and our estimated range of possible loss. If future representations and warranties losses occur in excess of our recorded liability and estimated range of possible loss ~~for non-GSE exposures and in excess of our recorded liability for GSE exposures~~, including as a result of the factors set forth ~~below~~above, such losses could have a material adverse effect on our cash flows, financial condition and results of operations.

The liability for ~~obligations under~~ representations and warranties ~~with respect to GSE and non-GSE~~ exposures and the corresponding ~~estimate~~estimated ~~of the~~ range of possible loss for ~~non-GSE~~these representations and warranties exposures do not ~~include~~consider any losses related to litigation matters disclosed in Note 14 to the Consolidated Financial Statements, nor do they include any potential securities law or fraud claims or potential indemnity or other claims against us. Merrill Lynch is not able to reasonably estimate the amount of any possible loss with respect to any such securities law, (fraud or other claims against us, except to the extent reflected in the aggregate range of possible loss for litigation and regulatory matters disclosed in Note 14 to the Consolidated Financial Statements~~), fraud or other claims against us~~; however, such loss could have a material adverse effect on our cash flows, financial condition and results of operations.

For additional information about our representations and warranties exposure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Off-Balance Sheet Exposures — Representations and Warranties” and Note 14 to the Consolidated Financial Statements.

IfOur ~~final~~representations ~~court~~and ~~approval~~warranties islosses ~~not~~could ~~obtained~~be ~~with~~substantially ~~respect~~higher tothan existing accruals and the existing estimated range of possible loss for representations and warranties liability if court approval of the BNY Mellon Settlement is not obtained or if it is otherwise abandoned. On June 28, 2011, Bank of America and certain of its non-Merrill Lynch subsidiaries ~~determine~~entered into a settlement agreement with The Bank of New York Mellon (“BNY Mellon”), as trustee, to ~~withdraw~~resolve, ~~from~~among ~~the~~other ~~settlement~~claims, ~~Merrill~~all ~~Lynch's~~outstanding ~~future~~and potential claims related to alleged representations and warranties ~~losses~~breaches ~~could~~(including ~~substantially~~repurchase ~~exceed~~claims) ~~our~~with ~~existing~~respect ~~accruals~~to the 525 legacy first-lien and ~~the~~five ~~estimated~~second-lien ~~range~~non-GSE ofresidential ~~possible~~mortgage-backed ~~loss~~securitization ~~over~~trusts ~~existing~~containing ~~accruals,~~loans ~~and~~principally ~~consequently~~originated ~~could~~between ~~have~~2004 aand ~~material~~2008 ~~adverse~~and ~~effect~~for onwhich ~~Merrill~~BNY ~~Lynch's~~Mellon ~~cash~~acts ~~flows,~~as ~~financial~~trustee ~~condition~~or ~~and~~indenture ~~results~~trustee of(the ~~operations~~“BNY Mellon Settlement”). OnThe ~~June 28,~~BNY ~~2011,~~Mellon ~~Bank~~Settlement ofis ~~America~~subject to final court approval and certain ofother ~~its~~conditions. Although ~~non-~~

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~~Merrill~~the ~~Lynch~~final ~~subsidiaries~~court ~~entered~~hearings ~~into~~on athe settlement ~~agreement~~are ~~with~~scheduled ~~The~~to ~~Bank~~begin ofon ~~New~~May ~~York Mellon (“BNY Mellon”)~~2, ~~as trustee~~2013, towe ~~resolve,~~cannot among other claims, all outstanding and potential claims related to alleged representations and warranties breaches (including repurchase claims) with respect to the 525 legacy first-lien and five second-lien non-GSE residential mortgage-backed securitization trusts containing loans principally originated between 2004 and 2008 and for which BNY Mellon acts as trustee or indenture trustee (the “BNY Mellon Settlement”). The BNY Mellon Settlement is subject to final court approval and certain other conditions. It is not currently ~~possible to~~ predict the timing or ultimate outcome of the court approval process, which can include appeals and could take a substantial period of time. There can be no assurance that final court approval of the ~~settlement~~BNY Mellon Settlement will be obtained, that all conditions will be satisfied (including the receipt of private letter rulings from the Internal Revenue Service (the “IRS”) and other tax rulings and opinions) or ~~that~~, if certain conditions to the BNY Mellon Settlement permitting withdrawal are met, that Bank of America and certain of its non-Merrill Lynch subsidiaries will not ~~determine to~~ withdraw from the BNY Mellon Settlement agreement.

If final court approval is not obtained with respect to the BNY Mellon Settlement, or if Bank of America and certain of its non-Merrill Lynch subsidiaries determine to withdraw from the BNY Mellon Settlement agreement in accordance with its terms, Merrill Lynch's future representations and warranties losses with respect to non-GSEs could substantially exceed our non-GSE reserve, together with our estimated range of reasonably possible loss ~~related~~for toall ~~non-GSE~~ representations and warranties ~~exposure~~exposures of up to $01.51 billion over existing accruals at December 31, ~~2011~~2012. Developments with respect to one or more of the assumptions underlying the estimated range of possible loss for ~~non-GSE~~ representations and warranties (including the timing and ultimate outcome of the court approval process relating to the BNY Mellon Settlement) could result in significant increases in our non-GSE reserve and/or to this estimated range of possible loss~~, and such increases could have a material adverse effect on our cash flows, financial condition and results of operations~~. For additional information regarding the BNY Mellon Settlement, see “Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Exposures - Representations and Warranties”.

~~Further~~If ~~weakness in~~ the U.S. housing market, ~~including~~weakens or home prices decline, ~~may adversely affect~~ our ~~asset~~consumer ~~classes~~loan ~~and~~portfolios, ~~have~~credit aquality, ~~significant~~credit ~~adverse~~losses, ~~effect~~representations onand ~~our~~warranties ~~financial~~exposures, ~~condition~~ and ~~results~~earnings ofmay ~~operations. Economic~~be ~~weakness~~adversely inaffected. Although ~~2011 was accompanied by continued stress in the~~ U.S. ~~housing~~ ~~market, including declines in~~ home prices. ~~These~~have ~~declines~~shown insigns ~~the~~of ~~housing~~improvement ~~market~~during 2012, ~~with~~the ~~falling~~declines ~~home~~over ~~prices~~the ~~and~~past ~~elevated~~several ~~foreclosures,~~years ~~have~~ negatively impacted the credit performance of certain of our portfolios. Continued high unemployment rates in the U.S. have challenged U.S. consumers and further compounded these stresses in the U.S. housing market as employment conditions may be compelling some consumers to delay new home purchases or miss payments on existing mortgages.

Conditions in the U.S. housing market ~~have~~over the past several years also resulted in significant write-downs of asset values in several asset classes, notably mortgage-backed securities and exposure to monolines. If ~~These~~the ~~conditions~~U.S. ~~may~~housing ~~negatively~~market ~~affect~~were to weaken, the value of real estate could decline, which could negatively affect our exposure to representations and warranties. While there were ~~continued~~ indications ~~throughout~~in ~~the~~2012 ~~past year~~ that the U.S. economy is stabilizing, the performance of our overall portfolios may not significantly improve in the near future. A protracted continuation or worsening of ~~these~~ difficult U.S. housing market conditions may exacerbate the adverse effects outlined above and could have a significant adverse effect on our financial condition and results of operations.

Credit Risk

Credit risk is the risk of loss arising from a borrower, obligor or counterparty default when a borrower, obligor or counterparty does not meet its obligations.

~~Increased~~Economic ~~credit risk, due to economic~~ or market disruptions, insufficient credit loss reserves or concentration of credit risk, may necessitate ~~increased~~an ~~provisions~~increase in the provision for credit losses, ~~and~~which could have an adverse effect on our financial condition and results of operations. When we buy debt securities, loan money, commit to loan money or enter into a letter of credit or other contract with a counterparty, we incur credit risk, or the risk of losses if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their agreements. A number of our products expose us to credit risk, including loans, lending commitments, derivatives, trading account assets and assets held-for-sale. The credit quality of our portfolios has a significant impact on our earnings.

Global and U.S. economic conditions may impact our credit portfolios. To the extent economic or market disruptions occur, such disruptions would likely increase our credit exposure to customers, obligors or other counterparties due to the increased risk that they may default on their obligations to us.

We estimate and establish an allowance for credit losses for losses inherent in our lending activities (including unfunded lending commitments), excluding those measured at fair value, through a charge to earnings. The amount of allowance is determined based on our evaluation of the potential credit losses included within our loan portfolio. The process for determining the amount of the allowance requires difficult, subjective and complex judgments. Our ability to assess future economic conditions or the creditworthiness of our customers, obligors or other counterparties is imperfect. We may suffer unexpected losses if the models and assumptions we use to establish

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~~Global~~reserves and ~~U.S.~~make ~~economic~~judgments ~~conditions~~in ~~continue~~extending credit to ~~weigh on~~ our ~~credit~~borrowers ~~portfolios.~~and ~~Economic~~other orcounterparties ~~market~~become ~~disruptions~~less ~~are~~predictive ~~likely~~of tofuture ~~increase~~events. In ~~our~~such ~~credit~~an ~~exposure to customers~~event, ~~obligors~~we ormight ~~other~~need ~~counterparties due~~ to increase the ~~increased~~size ~~risk~~of ~~that~~our ~~they~~allowance, ~~may~~which ~~default~~reduces onour ~~their obligations to us~~earnings.

WeIn ~~estimate~~the ~~and~~ordinary ~~establish~~course anof ~~allowance~~our ~~for~~business, ~~credit~~we ~~losses~~also ~~for~~may ~~losses~~be ~~inherent~~subject into ~~our~~a ~~lending~~concentration ~~activities~~of ~~(including~~credit ~~unfunded~~risk ~~lending~~in ~~commitments),~~a ~~excluding~~particular ~~those~~industry, ~~measured~~country, ~~at fair value~~counterparty, ~~through~~borrower aor ~~charge to earnings~~issuer. ~~The~~A ~~amount~~deterioration ofin ~~allowance~~the isfinancial ~~determined~~condition ~~based~~or onprospects ~~our~~of ~~evaluation~~a ofparticular ~~the~~industry ~~potential~~or ~~credit~~a ~~losses~~failure ~~included~~or ~~within~~downgrade ~~our~~of, ~~loan~~or ~~portfolio.~~default ~~The~~by, ~~process~~any ~~for~~particular ~~determining~~entity ~~the~~or ~~amount~~group of ~~the~~entities ~~allowance~~could ~~requires~~negatively ~~difficult,~~affect ~~subjective~~our businesses, and ~~complex~~the ~~judgments.~~processes ~~Our~~by ~~ability~~which towe ~~assess~~set ~~future~~limits ~~economic~~and ~~conditions~~monitor or the ~~creditworthiness~~level of our ~~customers,~~credit ~~obligors~~exposure orto ~~other~~individual ~~counterparties~~entities, isindustries ~~imperfect.~~and Wecountries may ~~suffer~~not ~~unexpected~~function ~~losses~~as ifwe ~~the~~have ~~models~~anticipated. ~~and~~While ~~assumptions~~our weactivities ~~use~~expose us to ~~establish~~many ~~reserves~~different industries and ~~make~~counterparties, ~~judgments~~we inroutinely ~~extending~~execute ~~credit~~a tohigh ~~our~~volume ~~borrowers~~of ~~and~~transactions ~~other~~with counterparties ~~become~~in ~~less~~the ~~predictive~~financial ofservices ~~future~~industry, ~~events. In~~including ~~such~~broker-dealers, ancommercial ~~event~~banks, weinvestment ~~might~~funds ~~need~~and toinsurers. ~~increase~~This ~~the~~has ~~size~~resulted ofin ~~our~~significant ~~allowance,~~credit ~~which~~concentration ~~could~~with ~~adversely~~respect ~~affect~~to ~~our~~this ~~financial condition and results of operations~~industry.

In the ordinary course of our business, we also may be subject to a concentration of credit risk in a particular industry, country, counterparty, borrower or issuer. A deterioration in the financial condition or prospects of a particular industry or a failure or downgrade of, or default by, any particular entity or group of entities could have a material adverse effect on our businesses, and the processes by which we set limits and monitor the level of our credit exposure to individual entities, industries and countries may not function as we have anticipated. While our activities expose us to many different industries and counterparties, we routinely execute a high volume of transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment funds and insurers. This has resulted in significant credit concentration with respect to this industry.

In the ordinary course of business, we also enter into transactions with sovereign nations, U.S. states and U.S. municipalities. Unfavorable economic or political conditions, disruptions to capital markets, currency fluctuations, social instability and changes in government policies could impact the operating budgets or credit ratings of sovereign nations, U.S. states and U.S. municipalities and expose us to credit risk.

For additional information about our credit risk and credit risk management policies and procedures, see “Quantitative and Qualitative Disclosures about Market Risk — Credit Risk Management.”

We could suffer losses ~~as a result of the actions of, or deterioration in, the commercial soundness of our counterparties~~ and ~~other financial services institutions. We could suffer losses and~~ our ability to engage in routine trading and funding transactions could be adversely affected byas a result of the actions ~~and~~or deterioration in the commercial soundness of our counterparties and other ~~market~~financial ~~participants.~~services institutions. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. Financial services institutions and other counterparties are inter-related because of trading, funding, clearing or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to significant future liquidity problems, including losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of a counterparty or client. In addition, our credit risk may be impacted when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivatives exposure due us. ~~Any such losses could materially adversely affect our financial condition and results of operations.~~

Our derivatives businesses may expose us to unexpected risks and potential losses. We are party to a large number of derivatives transactions, including credit derivatives. Our derivatives businesses may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses ~~and have an adverse effect on our financial condition and results of operations~~. Severe declines in asset values, unanticipated credit events or unforeseen circumstances that may cause previously uncorrelated factors to become correlated (and vice versa) may create losses resulting from risks not appropriately taken into account in the development, structuring or pricing of a derivative instrument. The terms of certain of our OTC derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change in our credit ratings, we may be required to provide additional collateral or to provide other remedies, or our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements.

Many derivative instruments are individually negotiated and non-standardized, which can make exiting, transferring or settling some positions difficult. Many derivatives require that we deliver to the counterparty the underlying security, loan or other obligation in order to receive payment. In a number of cases, we do not hold, and may not be able to obtain, the underlying security, loan or other obligation.

In the event of a further downgrade of the credit ratings of ML & Co. and certain subsidiaries, certain derivative and other counterparties may request we substitute our affiliate, Bank of America, N.A. ("BANA") as counterparty for certain derivative contracts and other trading agreements. Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming BANA as the new counterparty, and the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, including naming BANA as the new counterparty, could adversely affect our results of operations.

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Following the downgrade of the credit ratings of ML & Co. and certain subsidiaries, we have engaged in discussions with certain derivative and other counterparties regarding their rights under these agreements. In response to counterparties' inquiries and requests, we have discussed and in some cases substituted derivative contracts and other trading agreements, including naming our affiliate, Bank of America, N.A. ("BANA") as the new counterparty. Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming BANA as the new counterparty, and the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, including naming BANA as the new counterparty, could adversely affect our results of operations.

Derivatives contracts and other transactions entered into with third parties are not always confirmed by the counterparties or settled on a timely basis. While a transaction remains unconfirmed or during any delay in settlement, we are subject to heightened credit and operational risk and in the event of default may find it more difficult to enforce the contract. In addition, as new and more complex derivatives products have been created, covering a wider array of underlying credit and other instruments, disputes about the terms of the underlying contracts may arise, which could impair our ability to effectively manage our risk exposures from these products and subject us to increased costs.

For additional information on our derivatives exposure, see Note 6 to the Consolidated Financial Statements.

Market Risk

Market risk is the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions such as market volatility. Market risk is inherent in the financial instruments associated with our operations ~~and activities~~, including loans, deposits, securities, short-term borrowings, long-term debt, trading account assets and liabilities, and derivatives.

~~Our~~Negative ~~businesses and results of operations have been, and may continue to be, significantly adversely affected by~~ changes in the levels of market volatility and by other financial or capital market conditions may increase our market risk. Our ~~businesses~~liquidity, ~~and~~cash flows, competitive position, business, results of operations ~~may~~and befinancial ~~adversely~~condition are affected by market risk factors such as changes in interest and currency exchange rates, equity and futures prices, the implied volatility of interest rates, credit spreads and other economic and business factors. These market risks may adversely affect, among other things, (i) the value of our on- and off-balance sheet securities, trading assets, and other financial instruments, (ii) the cost of debt capital and our access to credit markets, (iii) the value of assets under management, ~~which could reduce our~~ (iv) fee income relating to ~~those~~ assets under management, (ivv) customer allocation of capital among investment alternatives, (vvi) the volume of client activity in our trading operations, (vivii) investment banking fees, and (~~vii~~viii) the general profitability and risk level of the transactions in which we engage. For ~~Any~~example, the value of ~~these~~certain ~~developments~~of ~~could~~our ~~have~~assets is sensitive to changes in market interest rates. If the Federal Reserve changes or signals a ~~significant~~change ~~adverse~~in ~~impact~~its oncurrent ~~our~~mortgage ~~financial~~securities ~~condition~~repurchase ~~and~~program, ~~results~~market interest rates could be affected, which could adversely impact the value of ~~operations~~such assets.

We use various models and strategies to assess and control our market risk exposures but those are subject to inherent limitations. Our models, which rely on historical trends and assumptions, may not be sufficiently predictive of future results due to limited historical patterns, extreme or unanticipated market movements and illiquidity, especially during severe market downturns or stress events. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation ~~or lack thereof~~ among prices of various asset classes or other market indicators.

In times of market stress or other unforeseen circumstances, such as the market conditions experienced in 2008 and 2009, previously uncorrelated indicators may become correlated, or previously correlated indicators may move in different directions. These types of market movements have at times limited the effectiveness of our hedging strategies and have caused us to incur significant losses, and they may do so in the future. These changes in correlation can be exacerbated where other market participants are using risk or trading models with assumptions or algorithms that are similar to ours. In these and other cases, it may be difficult to reduce our risk positions due to the activity of other market participants or widespread market dislocations, including circumstances where asset values are declining significantly or no market exists for certain assets. To the extent that we own securities that do not have an established liquid trading market or are otherwise subject to restrictions on sale or hedging, we may not be able to reduce our positions and therefore reduce our risk associated with such positions. In addition, challenging market conditions may also adversely affect our investment banking fees.

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activity of other market participants or widespread market dislocations, including circumstances where asset values are declining significantly or no market exists for certain assets. To the extent that we own securities that do not have an established liquid trading market or are otherwise subject to restrictions on sale or hedging, we may not be able to reduce our positions and therefore reduce our risk associated with such positions. In addition, challenging market conditions may also adversely affect our investment banking fees.

For additional information about market risk and our market risk management policies and procedures, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of this Form 10-K.

Further downgrades in the U.S. government's sovereign credit rating, or in the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in risks to Merrill Lynch and its credit ratings and general economic conditions that we are not able to predict.

On August 2, 2011, Moody's affirmed the U.S. government's existing sovereign rating, but revised the rating outlook to negative. On August 5, 2011, S&P downgraded the U.S. government's long-term sovereign credit rating to AA+ from AAA and stated that the outlook on the long-term rating is negative. On the same day, S&P affirmed its A-1+ short-term rating on the U.S. and removed it from CreditWatch negative. On November 28, 2011, Fitch affirmed its AAA long-term rating on the U.S., but changed the outlook from stable to negative. On the same day, Fitch affirmed its F1+ short-term rating on the U.S. All three rating agencies have indicated that they will continue to assess fiscal projections and consolidation measures, as well as the medium-term economic outlook for the U.S.11

~~There~~Table ~~continues to be the perceived risk~~ of a sovereign credit ratings downgrade of the U.S. government, including the ratings of U.S. Treasury securities. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could also be correspondingly affected by any such downgrade. Instruments of this nature are key assets on the balance sheets of financial institutions, including Merrill Lynch, and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. A downgrade of the sovereign credit ratings of the U.S. government and perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affecting the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. Contents

WeOn ~~cannot~~June ~~predict~~8, if2012, ~~when~~S&P oraffirmed ~~how~~its ~~any~~AA+ ~~changes~~long-term toand ~~the~~A-1+ ~~credit~~short-term ~~ratings~~sovereign orcredit ~~perceived~~rating ~~creditworthiness~~on ofthe ~~these~~U.S. ~~organizations~~government. The ~~will~~outlook ~~affect~~remains ~~economic conditions~~negative. On ~~Such~~July ~~ratings~~10, ~~actions~~2012, ~~could~~Fitch ~~result~~affirmed inits aAAA ~~significant~~long-term ~~adverse~~and ~~impact~~F1+ toshort-term ~~us.~~sovereign ~~The~~ credit rating ~~agencies’~~on ~~ratings~~the ~~for~~U.S. ~~Bank~~government. The ofoutlook ~~America~~remains ~~(and~~negative. Moody's ~~consequently,~~also ~~Merrill~~rates ~~Lynch)~~the ~~could~~U.S. begovernment ~~directly~~AAA orwith ~~indirectly impacted by~~ a ~~downgrade~~negative ~~of the U~~outlook.S. All ~~government’s~~three ~~sovereign~~ rating ~~because~~agencies ~~the~~have ~~credit~~indicated ~~ratings~~that ofthey ~~large~~will ~~systemically~~continue ~~important~~to ~~financial~~assess ~~institutions~~fiscal ~~currently~~projections ~~incorporate~~and aconsolidation ~~degree~~measures, ofas ~~uplift~~well ~~due~~as tothe ~~assumptions~~medium-term ~~concerning~~economic ~~government~~outlook ~~support~~for the U.S.

AThere ~~downgrade~~continues ofto be the perceived risk of a sovereign credit ratings downgrade of the U.S. government, orincluding the ~~credit~~ ratings of ~~related~~U.S. ~~institutions,~~Treasury ~~agencies~~securities orand ~~instrumentalities would significantly exacerbate the~~ other ~~risks~~government-backed tosecurities. It ~~which~~is ~~Merrill~~foreseeable ~~Lynch~~that isthe ~~subject~~ratings and ~~any~~perceived ~~related~~creditworthiness ~~adverse~~of ~~effects~~instruments ~~on our business~~issued, ~~financial~~insured ~~condition~~or ~~and~~guaranteed ~~results~~by ~~of operations~~institutions, ~~including~~agencies ~~those~~or ~~described~~instrumentalities ~~under~~directly ~~"Risk~~linked ~~Factors~~to -the ~~Credit~~U.S. ~~Risk~~government -could Wealso ~~could~~be ~~suffer~~correspondingly ~~losses~~affected asby aany ~~result~~such downgrade. Instruments of ~~the~~this ~~actions~~nature ofare orkey ~~deterioration~~assets inon the ~~commercial~~balance ~~soundness~~sheets of ~~our counterparties and other~~ financial ~~services~~ institutions," ~~"Risk~~including ~~Factors~~Merrill -Lynch, ~~Market~~and ~~Risk~~are -widely ~~Our~~used ~~business~~as ~~and~~collateral ~~results~~by ~~of operations~~financial ~~have~~institutions ~~been,~~to ~~and~~meet ~~may~~their ~~continue~~ day-to-day ~~be,~~cash ~~significantly~~flows ~~adversely~~in ~~affected~~the byshort-term ~~changes~~debt inmarket. ~~the~~A ~~levels~~downgrade of ~~market~~the ~~volatility~~sovereign ~~and~~credit byratings ~~other~~of ~~financial~~the orU.S. ~~capital market~~government ~~conditions"~~ and ~~"Risk~~perceived ~~Factors~~creditworthiness -of ~~Liquidity~~U.S. ~~Risk~~ government-related ~~Our~~obligations ~~liquidity,~~could ~~cash~~impact ~~flows,~~our ~~financial~~ability ~~condition~~to ~~and~~obtain ~~results~~funding ofthat ~~operations,~~is ~~and~~collateralized ~~competitive~~by ~~position may~~affected beinstruments, ~~significantly~~as ~~adversely~~well ~~affected~~as byaffecting the ~~inability~~pricing of usthat orfunding ~~Bank~~when ofit ~~America~~is toavailable. ~~access~~A ~~capital~~downgrade ~~markets,~~may oralso ifadversely ~~there~~affect isthe anmarket ~~increase~~value inof ~~our~~such ~~borrowing costs~~instruments."

~~Uncertainty~~We ~~about~~cannot ~~the~~predict ~~financial~~if, ~~stability~~when ofor ~~several~~how ~~countries~~any inchanges ~~the~~to ~~European Union ("EU"),~~ the ~~increasing~~credit ~~risk~~ratings ~~that~~or ~~those~~perceived ~~countries~~creditworthiness ~~may~~of ~~default~~these onorganizations ~~their~~will ~~sovereign~~affect ~~debt~~economic ~~and~~conditions. The ~~related~~credit ~~stresses~~rating onagencies’ ~~financial~~ratings ~~markets,~~for ~~the~~Bank ~~Euro~~of America (and ~~the~~consequently, EUMerrill Lynch) could ~~have~~be adirectly ~~significant~~or ~~adverse~~indirectly ~~effect~~impacted onby ~~our~~a ~~business,~~downgrade ~~financial condition and results~~ of ~~operations. In 2011,~~ the ~~financial~~U.S. ~~crisis~~government’s ~~in Europe continued, triggered by high~~ sovereign ~~budget~~rating ~~deficits~~because ~~and~~the ~~rising~~credit ~~direct~~ratings ~~and~~of ~~contingent~~large ~~sovereign~~systemically ~~debt~~important infinancial ~~Greece,~~institutions ~~Ireland,~~currently ~~Italy,~~incorporate ~~Portugal~~a ~~and~~degree ~~Spain, which created concerns about the ability~~ of ~~these~~uplift EUdue ~~countries~~ to ~~continue~~assumptions toconcerning ~~service~~government ~~their sovereign debt obligations~~support. ~~These conditions impacted financial markets and~~

A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instrumentalities would significantly exacerbate the other risks to which Merrill Lynch is subject and any related adverse effects on our business, financial condition and results of operations.

Our business may be affected by uncertainty about the financial stability of several European Union ("EU") countries, the risk that those countries may default on their sovereign debt and related stresses on financial markets, the Euro and the EU. Risks and ongoing concerns about the debt crisis in Europe could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions, and international financial institutions with exposure to the region, including us. Market and economic disruptions have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and residential mortgages, and housing prices, among other factors. There can be no assurance that the market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, and the possible loss of EU member states, will not spread, nor can there be any assurance that future assistance packages will be available or, even if provided, will be sufficient to stabilize the affected countries and markets in Europe or elsewhere. To the extent European economic recovery uncertainty continues to negatively impact consumer confidence and consumer credit factors, or should the EU enter a deep recession, both the U.S. economy and our business and results of operations could be adversely affected.

Merrill Lynch has substantial U.K. net deferred tax assets, which consist primarily of net operating losses ("NOLs") that are realizable by a few non-U.S. subsidiaries that have a recent history of cumulative losses. These net deferred tax assets relate to NOLs that may be realized over an extended number of years. Management has concluded that no valuation allowance is necessary with respect to such net deferred tax assets, based in part on current expectations, including regarding the cessation of certain business activities, changes to capital and funding, forecasts of business activities and the indefinite period to carry forward NOLs. Significant changes to those expectations, such as would be caused by a substantial and prolonged worsening of the condition of Europe's capital markets, could lead management to reassess its valuation allowance conclusions.

Global economic uncertainty, regulatory initiatives and reform have impacted, and will likely continue to impact, non-U.S. credit and trading portfolios. There can be no assurance our risk mitigation efforts in this respect will be sufficient or successful. Our total sovereign and non-sovereign exposure to Greece, Italy, Ireland, Portugal, and

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~~resulted~~Spain inwas ~~credit~~$2.9 ~~ratings~~billion ~~downgrades~~at ~~for,~~December ~~and high and volatile bond yields on~~31, ~~the sovereign debt of many EU countries~~2012. Our ~~Certain~~total ~~European~~net ~~countries~~sovereign ~~continue to experience varying degrees of financial stress,~~ and ~~yields on government~~non-~~issued~~sovereign ~~bonds~~exposure ~~in Greece, Ireland, Italy, Portugal and Spain have risen and remain volatile. Despite assistance packages~~ to ~~certain of~~ these countries, ~~the~~was ~~creation~~$1.5 ofbillion aat ~~joint~~December ~~EU-IMF~~31, ~~European Financial Stability Facility and additional expanded financial assistance to Greece~~2012, ~~uncertainty~~after ~~over~~taking ~~the~~into ~~outcome~~account ofnet ~~the~~credit EUdefault ~~governments' financial support programs and worries about sovereign finances and the stability of the Euro and the EU persist~~protection. At ~~Market~~December ~~concerns~~31, ~~over~~2012, the ~~direct~~fair ~~and~~value ~~indirect exposure~~ of ~~certain~~net ~~European banks and insurers to these EU countries resulted in a widening of~~ credit ~~spreads~~default ~~and~~protection ~~increased~~purchased ~~costs~~was of$1.4 ~~funding for these financial institutions~~billion. ~~While~~Losses wecould ~~have~~still ~~reduced~~result because our ~~exposure~~credit toprotection ~~European~~contracts ~~financial~~pay ~~institutions,~~out ~~the~~only ~~insolvency~~under ofcertain ~~one or more major European financial institutions could adversely impact financial markets and, consequently, our results of operations~~scenarios.

~~Risks~~For ~~and~~additional ~~ongoing~~information ~~concerns~~regarding ~~about~~our ~~the~~direct ~~debt crisis in Europe could have a detrimental impact on the global economic recovery,~~ sovereign and non-sovereign ~~debt~~exposures in these countries and the financial condition of European financial institutions, and international financial institutions with exposure to the region, including us. Market and economic disruptions have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and residential mortgages, and housing prices, among other factors. There can be no assurance that the market disruptions in Europe, ~~including~~see ~~the~~“Quantitative ~~increased cost of funding for certain governments~~ and ~~financial~~Qualitative ~~institutions,~~Disclosures ~~will~~about ~~not~~Market ~~spread,~~Risk ~~nor~~- ~~can~~Credit ~~there~~Risk beManagement” ~~any assurance that future assistance packages will be available or, even if provided, will be sufficient to stabilize the affected countries and markets~~ in ~~Europe or elsewhere. To the extent uncertainty regarding the European economic recovery continues to negatively impact consumer confidence and consumer credit factors~~Part II, orItem 7A ~~should the EU enter a deep recession, both the U.S. economy and our business and results~~ of operations could be significantly and adversely affected. Global economic uncertainty, regulatory initiatives and reform have impacted, and will likely continue to impact, non-U.S. credit and trading portfolios. We are seeking to address this ~~risk but there can be no assurance our efforts in this respect will be sufficient or successful. Our total sovereign and non~~Form 10-~~sovereign exposure to Greece, Italy, Ireland, Portugal, and Spain was $2~~K.7 billion at December 31, 2011. Our total net sovereign and non-sovereign exposure to these countries was $1.1 billion at December 31, 2011, after taking into account net credit default protection. At December 31, 2011, the fair value of net credit default protection purchased was $1.6 billion. Losses could still result because our credit protection contracts pay out only under certain scenarios.

~~For~~We ~~additional~~may ~~information~~incur ~~regarding~~losses ~~our~~if ~~direct~~the ~~sovereign~~values of certain assets decline. We have a large portfolio of financial instruments, including, among others, certain corporate loans and ~~non~~loan commitments, loans held-~~sovereign~~for-sale, ~~exposures~~repurchase inagreements, ~~Europe~~long-term deposits, ~~see~~trading ~~“Management's~~assets ~~Discussion~~and liabilities, derivatives assets and ~~Analysis~~liabilities, ofavailable-for-sale ~~Financial~~securities ~~Condition~~and certain other assets and ~~Results~~liabilities that we measure at fair value. We determine the fair values of ~~Operations -~~these ~~Executive~~instruments ~~Overview~~based -on ~~Other~~the ~~Events~~fair -value ~~European~~hierarchy ~~Union~~under ~~Sovereign~~applicable ~~Credit~~accounting ~~Risks"~~guidance. ~~and~~The ~~“Quantitative~~fair ~~and~~values ~~Qualitative~~of ~~Disclosures~~these ~~about~~financial ~~Market~~instruments ~~Risk-Credit~~include ~~Risk~~adjustments ~~Management”~~for inmarket ~~Part II~~liquidity, ~~Item 7A~~credit ofquality ~~this~~and ~~Form 10~~other transaction-Kspecific factors, where appropriate.

~~Declines~~Gains inor ~~the~~losses ~~value~~on ofthese ~~certain~~instruments ofcan ~~our~~have ~~assets~~a ~~could~~direct ~~have~~and ansignificant ~~adverse~~impact ~~effect~~ on our results of operations~~. We~~, unless we have aeffectively ~~large~~hedged ~~portfolio~~our exposures. Fair values may be impacted by declining values of ~~financial~~the ~~instruments,~~underlying ~~including,~~assets ~~among~~or ~~others,~~the ~~certain~~prices ~~corporate~~at ~~loans~~which observable market transactions occur and ~~loan~~the ~~commitments,~~continued ~~loans~~availability ~~held-for-sale,~~of ~~repurchase~~these ~~agreements,~~transactions. ~~long-term~~The ~~deposits,~~financial ~~trading~~strength ~~assets~~of ~~and~~counterparties ~~liabilities,~~with ~~derivatives~~whom ~~assets~~we ~~and~~have ~~liabilities,~~economically ~~available-for-sale~~hedged ~~securities~~some ~~and~~of ~~certain~~our ~~other~~exposure ~~assets~~to ~~and~~these ~~liabilities~~assets, ~~that~~also wewill ~~measure~~affect atthe fair value of these assets. WeSudden ~~determine~~declines ~~the~~and ~~fair~~volatility ~~values~~in the prices of ~~these~~assets ~~instruments~~may ~~based~~substantially oncurtail or eliminate the ~~fair~~trading ~~value~~activity ~~hierarchy~~for ~~under~~these ~~applicable~~assets, ~~accounting~~which ~~guidance~~may make it difficult to sell, hedge or value such assets. The ~~fair~~inability ~~values~~to ofsell ~~these~~or ~~financial~~effectively ~~instruments~~hedge ~~include~~assets ~~adjustments~~reduces ~~for~~our ~~market~~ability ~~liquidity,~~to ~~credit~~limit ~~quality~~losses in such positions and ~~other~~the ~~transaction~~difficulty in valuing assets may increase our risk-~~specific~~weighted ~~factors~~assets, ~~where~~which ~~appropriate~~requires us to maintain additional capital and increases our funding costs.

~~Gains~~Asset orvalues ~~losses~~also ondirectly ~~these instruments can have a direct and significant~~ impact onrevenues in our ~~results~~asset ofmanagement ~~operations, unless we have effectively hedged our exposures~~businesses. ~~Fair~~We ~~values~~receive ~~may~~asset-based bemanagement ~~impacted~~fees bybased ~~declining~~on ~~values~~the value of ~~the~~our ~~underlying~~clients’ ~~assets~~portfolios or ~~the~~investments ~~prices~~in atfunds ~~which~~managed ~~observable~~by ~~market~~us ~~transactions occur~~ and ~~the continued availability of these transactions. The financial strength of counterparties~~, ~~such~~in assome ~~monolines~~cases, ~~with whom~~ we ~~have~~also ~~economically~~receive ~~hedged~~incentive ~~some~~fees ofbased ~~our~~on ~~exposure~~increases toin ~~these assets, also will affect~~ the ~~fair~~ value of ~~these~~such ~~assets~~investments. ~~Sudden~~Declines ~~declines~~in ~~and~~asset ~~significant~~values ~~volatility~~can inreduce the ~~prices~~value of ~~assets~~our ~~may~~clients’ ~~substantially~~portfolios ~~curtail~~ or ~~eliminate~~fund ~~the trading activity for these~~ assets, which ~~may make it very difficult to sell, hedge or value such assets. The inability to sell or effectively hedge assets reduces our ability to limit losses~~ in ~~such~~turn ~~positions~~can ~~and~~result ~~the difficulty~~ in ~~valuing~~lower ~~assets~~fees ~~may~~earned ~~increase~~for ~~our~~managing ~~risk-weighted~~such assets~~, which requires us to maintain additional capital and increases our funding costs~~.

Asset values also directly impact revenues in our asset management businesses. We receive asset-based

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management fees based on the value of our clients’ portfolios or investments in funds managed by us and, in some cases, we also receive incentive fees based on increases in the value of such investments. Declines in asset values can reduce the value of our clients’ portfolios or fund assets, which in turn can result in lower fees earned for managing such assets.

For additional information about fair value measurements, see Note 4 and Note 5 to the Consolidated Financial Statements.

Changes in the method of determining the London Interbank Offered Rate (“LIBOR”) or other reference rates may adversely impact the value of debt securities and other financial instruments we hold or issue that are linked to LIBOR or other reference rates in ways that are difficult to predict and could adversely impact our financial condition or results of operations. In recent years, concerns have been raised about the accuracy of the calculation of the daily LIBOR. The method for determining how LIBOR is formulated and its use in the market going forward may change, including, but not limited to, replacing the administrator of LIBOR, reducing the currencies and tenors for which LIBOR is calculated and requiring banks to provide LIBOR submissions based on actual transaction data or otherwise changing the structure of LIBOR, each of which could impact the volatility of LIBOR. Similar changes may occur with respect to other reference rates. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would impact the value of any debt securities we hold or issue that are linked to LIBOR or other reference rates, or any loans, derivatives and other financial obligations or extensions of credit we hold or which are due to us, or for which we are an obligor, that are linked to LIBOR or other reference rates, or whether, or to what extent, such changes would impact our financial condition or results of operations.

Regulatory and Legal Risk

Government measures to regulate the financial services industry, including the Financial Reform Act, ~~either individually, in combination or in the aggregate,~~ have increased and will continue to increase our compliance and operating costs and could require us to change certain of our business practices, ~~impose significant additional costs on us,~~ limit ~~the~~our ~~products~~product ~~that we offer~~offerings, limit our ability to efficiently pursue business opportunities ~~in an efficient manner~~, require usan to increase to our capital, impact ~~the~~asset ~~value of assets that we hold~~values, ~~significantly~~and reduce our revenues ~~or otherwise materially and adversely affect our businesses, financial condition and results of operations~~. As a financial institution, we are heavily regulated at the state, federal and international levels. Following ~~As a result of~~ the ~~2008-2009~~ financial crisis and related global economic downturn, we have faced and expect to continue to face increased public and legislative scrutiny as well as stricter and more comprehensive regulation of our businesses. These regulatory and legislative measures, either individually, in combination or in the aggregate, could require us to further change certain of our business practices, impose significant additional costs on us, limit the products that we offer, limit our ability to pursue business opportunities in an efficient manner, require us to increase our capital, impact the value of assets that we hold, significantly reduce our revenues or otherwise materially and adversely affect our businesses, financial condition and results of operations.

On October 11, 2011, the Federal Reserve, the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) and the SEC, four of the five regulatory agencies charged with promulgating regulations implementing limitations on proprietary trading as well as the sponsorship of or investment in hedge funds and private equity funds (the “Volcker Rule”) established by the Financial Reform Act, released for comment proposed implementing regulations. On January 11, 2012, the Commodities Futures Trading Commission (the “CFTC”), the fifth agency, released for comment its proposed regulations under the Volcker Rule. The proposed regulations include clarifications to the definition of proprietary trading and distinctions between permitted and prohibited activities. The comment period for the first regulations proposed ended on February 13~~, 2012 and the comment period for the CFTC regulations will end in March 2012.~~

~~The~~Table ~~statutory provisions~~ of the Volcker Rule will become effective on July 21, 2012, whether or not the final regulations are adopted, and it gives certain financial institutions two years from the effective date, with opportunities for additional extensions, to bring activities and investments into compliance. Although Merrill Lynch exited its stand-alone proprietary trading business as of June 30, 2011 in anticipation of the Volcker Rule and to further our initiative to optimize our balance sheet, the ultimate impact of the Volcker Rule on us remains uncertain. However, based on the content of the proposed regulations, it is possible that the implementation of the Volcker Rule could limit or restrict our remaining trading activities. Implementation of the Volcker Rule could also limit or restrict our ability to sponsor and hold ownership interests in hedge funds, private equity funds and other subsidiary operations. Additionally, implementation of the Volcker Rule could increase our operational and compliance costs, reduce our trading revenues and adversely affect our results of operations. The date by which final regulations will be issued is uncertain. Contents

~~Additionally~~economic downturn, ~~the~~we ~~Financial~~have ~~Reform~~faced ~~Act~~and ~~includes~~expect ~~measures~~ to ~~broaden~~continue ~~the scope of derivative instruments subject~~ to ~~regulation~~face byincreased ~~requiring~~public ~~clearing~~ and ~~exchange~~legislative ~~trading~~scrutiny ofas ~~certain~~well ~~derivatives;~~as ~~imposing~~stricter ~~new~~and ~~capital,~~more ~~margin,~~comprehensive ~~reporting,~~regulation ~~registration~~of ~~and~~our business. ~~conduct~~These ~~requirements~~regulatory ~~for certain market participants;~~ and ~~imposing~~legislative ~~position~~measures, ~~limits~~either onindividually, ~~certain~~in ~~OTC~~combination ~~derivatives.~~or ~~The~~in ~~Financial Reform Act grants~~ the ~~CFTC~~aggregate, ~~and~~could ~~the~~require ~~SEC~~us ~~substantial new authority and requires numerous rulemakings by these agencies. The Financial Reform Act required regulators~~ to ~~promulgate~~further ~~the~~change ~~rulemakings~~our ~~necessary~~business topractices, ~~implement~~impose ~~these~~additional ~~regulations~~costs byon ~~July 16~~us, ~~2011. However,~~limit ~~the~~our ~~rulemaking~~product ~~process was not completed as of that date~~offerings, ~~and~~limit isour ~~not~~ability ~~expected~~ to ~~conclude~~efficiently ~~until~~pursue ~~well~~business ~~into 2012. Further~~opportunities, ~~the~~require ~~regulators~~an ~~granted~~increase ~~temporary~~to ~~relief~~our ~~from~~capital, ~~certain~~impact ~~requirements~~asset ~~that~~values ~~would~~and ~~have~~reduce ~~taken~~our ~~effect on July 16, 2011 absent any rulemaking~~revenues. ~~The SEC temporary relief is effective until final rules relevant to each requirement become~~

Federal banking and regulatory agencies have proposed regulations under the Financial Reform Act to limit proprietary trading as well as the sponsorship of or investment in hedge funds and private equity funds (the “Volcker Rule”). The proposed regulations include clarifications to the definition of proprietary trading and distinctions between permitted and prohibited activities. Although the comment period for these proposed regulations has expired, the regulatory agencies have not finalized the Volcker Rule regulations.

The statutory provisions of the Volcker Rule became effective on July 21, 2012 and gave financial institutions two years from the effective date, with the possibility for extensions for certain investments, to bring activities and investments into compliance with the statutory provisions and final regulations. Although Merrill Lynch exited its stand-alone proprietary trading business as of June 30, 2011 in anticipation of the Volcker Rule and to further our initiative to optimize our balance sheet, the ultimate impact of the Volcker Rule on us remains uncertain as the regulations implementing the Volcker Rule are not final. However, based on the content of the proposed regulations, it is possible the Volcker Rule implementation could limit or restrict our remaining trading activities. If exemptions in the Volcker Rule and the proposed regulations are not available, the Volcker Rule could also limit or restrict our ability to sponsor and hold ownership interests in hedge funds, private equity funds and other subsidiary operations. Additionally, the Volcker Rule could increase our operational and compliance costs, reduce our trading revenues and adversely affect our results of operations. The date on which final regulations will be issued is currently uncertain.

Additionally, the Financial Reform Act includes measures to broaden the scope of derivative instruments subject to regulation by requiring clearing and exchange trading of certain derivatives; imposing new capital, margin, reporting, registration and business conduct requirements for certain market participants; and imposing position limits on certain OTC derivatives. The Financial Reform Act grants the U.S. Commodity Futures Trading Commission (the "CFTC") and the SEC substantial new authority and requires numerous rulemakings by these agencies. Swaps dealers conducting dealing activity with U.S. persons above a specified dollar threshold were required to register with the CFTC on or before December 31, 2012. Upon registration, swap dealers became subject to additional CFTC rules relating to business conduct and reporting, and will continue to become subject to additional CFTC rules as and when such rules take effect.

The Financial Reform Act required regulators to promulgate the rulemakings necessary to implement these regulations by July 16, 2011. However, the rulemaking process was not completed as of that date, and is not expected to conclude until well into 2013. Further, the regulators granted temporary relief from certain requirements that would have taken effect on July 16, 2011 absent any rulemaking. The SEC temporary relief is effective until final rules relevant to each requirement become effective. The CFTC temporary relief largely expired on December 31, 2012. The CFTC also granted relief from some of the rules that would have become effective during the fourth quarter of 2012, either completely suspending or delaying the application of some requirements.

While the CFTC has provided temporary exemptive relief from application of derivatives requirements of the Financial Reform Act for certain non-U.S. derivatives activity, there remains some uncertainty as to how the derivatives requirements of the Financial Reform Act will apply to non-U.S. derivatives activity because the CFTC has not yet adopted final cross-border guidance. The CFTC has completed much of its other rulemakings, with the exception of final margin, capital and exchange trading rules, while the SEC has finalized a small number of clearing-related rules. The ultimate impact of the derivatives regulations that have not yet been finalized, and the time it will take to comply, continue to remain uncertain. The final regulations will impose additional operational and compliance costs on us and may require us to restructure certain businesses and may negatively impact our results of operations.

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~~effective~~Similarly, in the U. ~~The~~K., ~~CFTC~~the ~~temporary~~FSA ~~relief~~has isissued ~~effective~~proposed ~~until~~rules requiring the ~~earlier~~submission of ~~July~~significant ~~16,~~information ~~2012~~about orcertain ~~the~~U.K. ~~date~~incorporated onsubsidiaries ~~which~~and ~~final~~other ~~rules~~financial ~~relevant~~institutions, toas ~~each~~well ~~requirement~~as ~~become~~branches ~~effective~~of non-U.K. ~~The~~banks ~~ultimate~~located ~~impact~~in ofthe ~~these~~U.K ~~derivatives~~(including ~~regulations~~information on intra-group dependencies, ~~and~~legal ~~the~~entity ~~time~~separation itand ~~will~~barriers ~~take~~to resolution) to ~~comply,~~allow ~~continue~~the FSA to ~~remain~~develop ~~uncertain~~resolution plans. As ~~The~~a ~~final~~result ~~regulations~~of ~~will~~the ~~impose~~FSA ~~additional~~review, ~~operational~~we ~~and~~could ~~compliance~~be ~~costs~~required onto ustake ~~and~~certain ~~may~~actions ~~require~~over usthe tonext ~~restructure~~several ~~certain businesses~~years, ~~thereby~~which ~~negatively~~could ~~impacting~~impose ~~our~~operational ~~revenues~~costs and ~~results~~potentially result in the restructuring of ~~operations~~certain businesses and subsidiaries.

~~Similarly,~~Many inof the ~~U.K.,~~provisions under the ~~FSA~~Financial ~~has~~Reform ~~issued~~Act ~~proposed~~have ~~rules~~only ~~requiring~~begun to be implemented or remain to be implemented in the ~~submission~~future ofand ~~significant~~will ~~information~~be ~~about~~subject ~~certain~~both Uto further rulemaking and the discretion of applicable regulatory bodies.K. ~~incorporated~~The ~~subsidiaries~~Financial ~~(including~~Reform ~~information~~Act onwill ~~intra-group~~continue ~~dependencies~~to impact our earnings through revenue reductions, higher costs and ~~legal~~imposition ~~entity~~of ~~separation)~~new restrictions on us. The Financial Reform Act may also continue to ~~allow~~have a material adverse impact on the ~~FSA~~value toof ~~develop~~certain ~~resolution~~assets ~~plans~~and liabilities held on our balance sheet. AsThe aultimate ~~result~~impact of the ~~FSA~~Financial ~~review,~~Reform weAct ~~could~~on beour ~~required~~business towill ~~take~~depend ~~certain~~on ~~actions~~regulatory ~~over~~interpretation ~~the~~and ~~next~~rulemaking, ~~several~~as ~~years,~~well ~~which~~as ~~could~~the ~~impose~~success ~~operational~~of ~~costs~~any ~~and~~of ~~potentially~~our ~~could~~actions ~~result~~to inmitigate the ~~restructuring~~negative impacts of certain ~~businesses and subsidiaries~~provisions.

~~Many~~Changes in the structure of the ~~provisions~~GSEs ~~under~~and the ~~Financial~~relationship ~~Reform~~among ~~Act~~the ~~have~~GSEs, ~~begun~~the togovernment beand ~~phased~~the inprivate markets, or ~~will~~the beconversion ~~phased~~of inthe ~~over~~current ~~the~~conservatorship ~~next~~of ~~several~~the ~~months~~GSEs orinto ~~years~~receivership, ~~and~~could ~~will~~result bein ~~subject~~significant ~~both~~changes to ~~further~~our ~~rulemaking~~business operations and may adversely impact our business. Each GSE is currently in a conservatorship, with its primary regulator, the ~~discretion~~Federal Housing Finance Agency (the "FHFA"), acting as conservator. During these conservatorships the FHFA may increasingly converge certain risk management and other standards and practices of ~~applicable~~each ~~regulatory~~enterprise, ~~bodies~~which could result in a more uniform market for delivering agency conforming mortgage loans. ~~The~~We ~~Financial~~cannot ~~Reform~~predict ~~Act~~if, when or how the conservatorships will ~~continue~~end, or any associated changes to ~~have~~the aGSEs' ~~significant~~business ~~and~~structure ~~negative~~that ~~impact~~could onresult. ~~our~~We ~~earnings~~also ~~through~~cannot ~~revenue~~predict ~~reductions,~~whether ~~higher~~the ~~costs~~conservatorships ~~and~~will ~~new~~end ~~restrictions~~in receivership. ~~The~~There ~~ultimate~~are ~~impact~~several ofproposed approaches to reform the ~~Financial~~GSEs ~~Reform~~which, ~~Act~~if onenacted, ~~our~~could ~~businesses~~change ~~and~~the ~~results~~structure of ~~operations~~the ~~will~~GSEs ~~depend~~and onthe ~~regulatory~~relationship ~~interpretation~~among the GSEs, the government and ~~rulemaking~~the private markets, asincluding ~~well~~the astrading markets for agency conforming mortgage loans and markets for mortgage-related securities in which we participate. We cannot predict the ~~success~~prospects for the enactment, timing or content of ~~any~~legislative or rulemaking proposals regarding the future status of ~~our~~the ~~actions~~GSEs. Accordingly, there continues to ~~mitigate~~be ~~the~~uncertainty ~~negative~~regarding ~~earnings~~the ~~impact~~future of ~~certain~~the ~~provisions~~GSEs, including whether they will continue to exist in their current form.

~~Changes~~We are subject to significant financial and reputational risks from potential legal liability and regulatory action. We face significant legal risks in our business, and the ~~structure~~volume of ~~the~~claims ~~GSEs~~and amount of damages and ~~the~~penalties ~~relationship~~claimed ~~among~~in ~~the~~litigation ~~GSEs,~~and ~~the~~regulatory ~~government~~proceedings against us and ~~the~~other ~~private~~financial ~~markets~~institutions remain high and are increasing. Increased litigation costs, substantial legal liability or ~~the~~significant ~~conversion~~regulatory ofaction ~~the~~against ~~current~~us ~~conservatorship~~could have material adverse effects on our financial condition and results of ~~the~~operations ~~GSEs~~or ~~into~~cause ~~receivership~~significant reputational harm to us, which in turn could adversely impact ~~certain~~our ofbusiness ~~our~~prospects. ~~operations~~In addition, we continue to face increased litigation risk and regulatory scrutiny. ~~Each~~We ~~GSE~~continue isto ~~currently~~experience inincreased litigation and other disputes with counterparties regarding relative rights and responsibilities. Consumers, clients and other counterparties have grown more litigious. Our experience with certain regulatory authorities suggests a ~~conservatorship~~migration towards an increasing supervisory focus on enforcement, including in connection with ~~its~~alleged ~~primary~~violations ~~regulator~~of law and customer harm. The current environment of additional regulation, ~~the~~increased ~~Federal~~regulatory ~~Housing~~compliance ~~Finance~~burdens, ~~Agency~~and ~~(the~~enhanced ~~"FHFA")~~regulatory enforcement, ~~acting~~combined aswith ~~conservator.~~ongoing ~~During~~uncertainty ~~these~~related ~~conservatorships~~to the ~~FHFA~~continuing evolution of the regulatory environment, has resulted in significant operational and compliance costs and may limit our ability to continue providing certain products and services.

~~increasingly~~For ~~converge~~information concerning certain ~~risk~~litigation-related ~~management~~expenses ~~and~~recognized ~~other~~for ~~standards~~2012 and ~~practices of each enterprise~~2011, ~~which could result in a more uniform market for delivering agency conforming mortgage loans. We cannot predict if, when or how~~ the ~~conservatorships~~estimated ~~will~~aggregate ~~end,~~range orof ~~any~~possible ~~associated~~losses ~~changes to the GSEs' business structure that could result. We also cannot predict whether the conservatorships will end~~ in ~~receivership.~~excess ~~There~~of ~~are several proposed approaches to reform~~ the ~~GSEs~~accrued ~~which,~~liability (if ~~enacted,~~any) ~~could~~related ~~change~~to ~~the~~litigation ~~structure~~matters of(where ~~the~~an ~~GSEs~~estimate ~~and~~is ~~the~~possible) ~~relationship~~at ~~among~~December ~~the GSEs~~31, ~~the government and the private markets~~2012, ~~including~~as ~~the~~well ~~trading~~as ~~markets~~a ~~for~~further ~~agency~~discussion ~~conforming mortgage loans and markets for mortgage-related securities in which we participate. We cannot predict the prospects for the enactment, timing or content~~ of ~~legislative~~litigation ~~or rulemaking proposals regarding the future status of the GSEs. Accordingly~~risks, ~~there~~see ~~continues~~Note 14 to ~~be uncertainty regarding~~ the ~~future~~Consolidated ofFinancial ~~the~~Statements ~~GSEs, including whether they will continue to exist~~ in ~~their~~Part ~~current form. GSE reform~~II, ifItem ~~enacted,~~8 ~~could adversely impact certain~~ of ~~our~~this ~~operations~~Form 10-K.

WeOur ~~face~~business ~~substantial~~prospects ~~potential~~are ~~legal~~vulnerable ~~liability~~to ~~and~~changes ~~significant~~in ~~regulatory~~governmental ~~action,~~fiscal ~~which could have material adverse effects on our cash flows, financial condition~~ and ~~results~~monetary ~~of operations or cause significant reputational harm to us~~policy. WeOur ~~face significant legal risks in our~~ businesses, and ~~the~~earnings ~~volume~~are ofaffected ~~claims~~by ~~and~~domestic ~~amount of damages~~ and ~~penalties~~international ~~claimed~~fiscal ~~in litigation~~ and ~~regulatory~~monetary ~~proceedings against us and other financial institutions remain high and are increasing~~policy. The ~~Increased~~Federal ~~litigation~~Reserve ~~costs,~~regulates ~~substantial~~the ~~legal~~supply ~~liability~~of ormoney ~~significant regulatory action against us could have material adverse effects on our financial condition~~ and ~~results~~credit ~~of operations or cause significant reputational harm to us, which~~ in ~~turn~~the ~~could adversely impact our business prospects~~U. ~~In addition, we continue to face increased litigation risk and regulatory scrutiny~~S. We ~~have continued to experience increased litigation~~ and ~~other~~its ~~disputes~~policies ~~with~~affect ~~counterparties~~our ~~regarding~~cost ~~relative~~of ~~rights~~funds ~~and~~for ~~responsibilities. Consumers~~lending, ~~clients~~investing and ~~other~~capital ~~counterparties~~raising ~~have~~activities ~~grown~~and ~~more~~the ~~litigious. Our~~return ~~experience~~we ~~with~~earn ~~certain regulatory authorities suggests a migration towards an increasing supervisory focus~~ on ~~enforcement,~~those ~~including~~loans ~~in connection with alleged violations of law~~ and ~~customer~~investments, ~~harm. The~~both ~~current environment~~ of ~~additional~~which ~~regulation,~~affect ~~increased~~our ~~regulatory~~net ~~compliance~~interest ~~burdens,~~revenue. ~~and~~The ~~enhanced~~Federal ~~regulatory~~Reserve's ~~enforcement,~~actions ~~combined~~also ~~with~~can ~~ongoing~~affect ~~uncertainty related to~~ the ~~continuing~~value ~~evolution~~ of ~~the~~financial ~~regulatory~~instruments ~~environment, has resulted in significant operational~~ and ~~compliance~~other ~~costs~~assets, ~~and~~such ~~may~~as ~~limit our ability to continue providing certain products and services.~~

These litigation and regulatory matters and any related settlements could have a material adverse effect on our cash flows, financial condition and results of operations. They could also negatively impact our reputation. For information concerning certain litigation-related expenses recognized for 2011 and 2010, the estimated aggregate range of possible losses in excess of the accrued liability (if any) related to litigation matters (where an estimate is possible) at December 31, 2011, as well as a further discussion of litigation risks, see Note 14 to the Consolidated

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~~Financial~~debt ~~Statements~~securities, and its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans. Our businesses and earnings are also affected by the fiscal or other policies that are adopted by the U.S. government, various U.S. regulatory authorities and non-U.S. governments and regulatory authorities. Changes in ~~Part~~domestic IIand international fiscal and monetary policies are beyond our control and difficult to predict, ~~Item~~but 8could have an adverse impact on our capital requirements and the costs of ~~this~~running ~~Form~~our ~~10-K~~business.

~~Changes~~We inmay ~~governmental~~be ~~fiscal and monetary policy could~~ adversely ~~affect~~affected ~~our~~by ~~financial~~changes ~~condition~~in ~~and results of operations~~U. ~~Our~~S. ~~businesses~~ and ~~earnings~~non-U.S. ~~are~~tax ~~affected by domestic~~ and ~~international~~other ~~fiscal~~laws and ~~monetary policy~~regulations. The ~~Federal~~U.S. ~~Reserve~~Congress ~~regulates~~and the ~~supply~~Administration ofhave ~~money~~signaled ~~and~~interest ~~credit~~ in reforming the U.S. ~~and~~corporate ~~its~~income ~~policies~~tax ~~determine~~code. Possible inapproaches ~~large~~include ~~part~~lowering ~~our~~the ~~cost~~35% ofcorporate ~~funds~~tax ~~for lending~~rate, ~~investing~~modifying ~~and capital raising activities and~~ the ~~return~~taxation ~~we earn on those loans and investments, both~~ of ~~which~~income ~~affect~~earned ~~our~~outside ~~net interest revenue. The actions~~ of the ~~Federal~~U.S. ~~Reserve~~and ~~also~~limiting ~~can~~or ~~materially~~eliminating ~~affect~~various ~~the value of financial instruments and~~ other ~~assets~~deductions, ~~such~~tax ascredits ~~debt securities,~~ and/or ~~its~~other ~~policies~~tax ~~also~~preferences. ~~can~~It ~~affect~~is ~~our~~not ~~borrowers,~~possible ~~potentially~~at ~~increasing~~this ~~the~~time ~~risk that they may fail~~ to ~~repay~~quantify ~~their~~either ~~loans. Our businesses and earnings are also affected by~~ the ~~fiscal~~one-time orimpact ~~other~~from ~~policies~~remeasuring ~~that~~deferred ~~are~~tax ~~adopted~~assets ~~by the U.S. government, various U.S. regulatory authorities~~ and ~~non-U.S. governments~~liabilities ~~and~~that ~~regulatory~~might ~~authorities. Changes~~result inupon ~~domestic~~tax ~~and~~reform ~~international~~enactment ~~fiscal~~or ~~and~~the ~~monetary~~ongoing ~~policies~~impact ~~are~~reform ~~beyond~~might ~~our control and difficult to predict, but could~~ have ~~an adverse impact~~ on ~~our~~income ~~capital~~tax ~~requirements and the costs of running our businesses, in turn adversely impacting our financial condition and results of operations~~expense.

~~Changes~~In inaddition, ~~U.S.~~income ~~and~~from certain non-U.S. ~~tax~~subsidiaries ~~and~~has ~~other~~not ~~laws~~been ~~and~~subject ~~regulations~~to ~~could adversely affect our financial condition and results of operations. The~~ U.S. ~~Congress~~income ~~and~~tax ~~the~~as ~~Administration~~a ~~have~~result ~~signaled~~of ~~growing~~long-standing ~~interest~~deferral inprovisions ~~reforming~~applicable ~~the~~to ~~U.S.~~income ~~corporate~~that ~~income~~is ~~tax.~~derived ~~While~~in the ~~timing~~active conduct of ~~such~~a ~~reform~~banking isand ~~unclear,~~financing ~~possible~~business ~~approaches~~abroad ~~include~~(active ~~lowering~~finance ~~the~~income). ~~35%~~The ~~corporate~~U.S. ~~tax~~Congress ~~rate,~~has ~~modifying~~extended the ~~taxation~~application of ~~income~~these ~~earned~~deferral ~~outside~~provisions ofseveral ~~the~~times, ~~U.S.~~most ~~and~~recently ~~limiting~~in orJanuary ~~eliminating~~2013. ~~various~~These ~~other~~provisions ~~deductions,~~now ~~tax~~are ~~credits~~set ~~and/or~~to ~~other~~expire ~~tax~~for ~~preferences.~~taxable Ityears isbeginning ~~not~~on ~~possible~~or atafter ~~this~~January ~~time~~1, to2014. Absent ~~quantify~~an ~~either~~extension ~~the~~of ~~one-time~~these ~~impact~~provisions, ~~from~~active ~~remeasuring~~financing ~~deferred~~income ~~tax~~earned ~~assets~~by ~~and~~certain ~~liabilities~~non-U.S. ~~that~~subsidiaries ~~might~~will ~~result~~generally ~~upon~~be ~~enactment~~subject ofto a tax ~~reform~~provision orthat ~~the~~considers ~~ongoing~~incremental ~~impact~~U.S. ~~reform might have on~~ income tax. ~~expense,~~The ~~but~~impact ~~either~~of the expiration of these ~~impacts~~provisions ~~could~~would ~~adversely~~depend ~~affect~~upon ~~our~~the ~~financial~~amount, ~~condition~~composition and ~~results~~geographic mix of ~~operations~~our future earnings.

InOther ~~addition,~~countries ~~the~~have ~~income~~also ~~from~~proposed ~~certain~~and ~~non-U.S.~~adopted ~~subsidiaries~~certain ~~has~~regulatory ~~not~~changes ~~been~~targeted ~~subject~~at tofinancial ~~U.S.~~institutions ~~income~~or ~~tax~~that asotherwise aaffect ~~result~~us. ofThe ~~long-standing~~EU ~~deferral~~has ~~provisions~~adopted ~~applicable~~increased tocapital ~~income~~requirements ~~that~~and ~~is derived in~~ the ~~active~~U.K. ~~conduct~~has of(i) aincreased ~~banking~~liquidity ~~and~~requirements ~~financing~~for ~~business~~local ~~(active~~financial ~~finance~~institutions, ~~income).~~including ~~The~~regulated U.SK. ~~Congress~~subsidiaries ~~has extended the application~~ of ~~these~~non-U.K. ~~deferral~~bank ~~provisions~~holding ~~several~~companies ~~times,~~and ~~most~~other ~~recently~~financial ininstitutions ~~2010.~~as ~~These~~well ~~provisions~~as ~~now~~branches ~~are~~of ~~set~~non-U.K. tobanks ~~expire~~located ~~for~~in ~~taxable~~the ~~years~~U.K.; ~~beginning~~(ii) onadopted ora ~~after~~Bank ~~January 1~~Levy, ~~2012.~~which ~~Absent~~will anapply ~~extension~~to ofthe ~~these~~aggregate ~~provisions,~~balance ~~active~~sheet ~~financing~~of ~~income~~branches ~~earned~~and bysubsidiaries ~~certain~~of non-U.SK. ~~subsidiaries~~banks ~~will~~and ~~generally~~banking begroups ~~subject~~operating toin athe ~~tax provision that considers incremental~~ U.SK.; ~~income~~and ~~tax.~~(iii) ~~The~~proposed ~~impact~~the ofcreation ~~the~~and ~~expiration~~production of ~~these~~recovery ~~provisions would depend upon the amount, composition~~ and ~~geographic~~resolution ~~mix~~plans ofby ~~our~~U.K.-regulated ~~future earnings~~entities.

~~Other~~On ~~countries~~July ~~have~~17, ~~also~~2012, ~~proposed~~the ~~and,~~U.K. in2012 ~~some~~Finance ~~cases,~~Bill ~~adopted~~was ~~certain~~enacted, ~~regulatory~~which ~~changes~~reduced ~~targeted~~the atcorporate ~~financial~~income ~~institutions~~tax orrate ~~that~~by ~~otherwise~~two ~~affect~~percent ~~us.~~to 23%. The EUfirst ~~has~~one ~~adopted~~percent ~~increased~~reduction ~~capital~~was ~~requirements~~effective April 1, 2012 and the second will be effective April 1, 2013. These rate reductions favorably affect income tax expense on future U.K. ~~has~~earnings, ~~(i)~~but ~~increased~~also ~~liquidity~~required ~~requirements~~us to remeasure our U.K. net deferred tax assets using the lower tax rates. The income tax benefit for ~~local~~the ~~financial~~year ~~institutions~~ended December 31, ~~including~~2012 ~~regulated~~included Ua $781 million charge for the remeasurement.K. ~~subsidiaries~~If ofthe ~~non-~~U.K. ~~bank~~corporate ~~holding~~income ~~companies~~tax ~~and~~rate ~~other~~were ~~financial~~to ~~institutions~~be asreduced ~~well~~to 21% by 2014, as ~~branches~~suggested ofin ~~non-~~U.K. ~~banks~~Treasury ~~located~~announcements and assuming no change in the ~~U.K;~~deferred ~~(ii)~~tax ~~adopted~~asset balance, we would record a ~~Bank~~charge ~~Tax~~to ~~Levy~~income ~~which~~tax ~~will~~expense ~~apply~~of toapproximately ~~the~~$800 ~~aggregate~~million ~~balance~~in ~~sheet~~the period of ~~branches~~enactment. We ~~and~~are ~~subsidiaries~~also ofmonitoring ~~non-~~other international legislative proposals that could impact us, such as changes to corporate income tax laws. Currently, in the U.K., ~~banks~~NOL ~~and~~carryforwards ~~banking~~have ~~groups~~an ~~operating~~indefinite inlife. Were the U.K.; ~~and~~taxing ~~(iii)~~authorities ~~proposed~~to ~~the~~introduce ~~creation~~limitations ~~and~~on ~~production~~the future utilization of ~~recovery~~NOLs and ~~resolution~~we ~~plans~~were unable to document our continued ability to fully utilize our NOLs, we would be required to establish a valuation allowance by ~~U.K.-regulated~~a ~~entities~~charge to income tax expense.

OnRisk July 19, 2011, the U.K. 2011 Finance Bill was enacted, which reduced the corporate income tax rate by one percent to 26% beginning on April 1, 2011, and then to 25% effective April 1, 2012. These rate reductions will favorably affect income tax expense on future U.K. earnings but also required us to remeasure our U.K. net deferred tax assets using the lower tax rates. The income tax benefit for the year ended December 31, 2011 included a $774 million charge for the remeasurement. If U.K. corporate income tax rates were to be reduced to 23% by 2014, as suggested in U.K. Treasury announcements and assuming no change in the deferred tax asset balance, a charge to income tax expense of ~~approximately $400 million for each one percent reduction in~~ the ~~rate~~Competitive ~~would~~Environment ~~result~~ in ~~each~~Which ~~period of enactment (for a total of approximately $800 million).~~ We are also monitoring other international legislative proposals that could materially impact us, such as changes to corporate income tax laws. Currently, in the U.K., net operating loss carryforwards (“NOLs”) have an indefinite life. Were the U.K. taxing authorities to introduce limitations on the future utilization of NOLs and we were unable to document our continued ability to fully utilize our NOLs, we would be required to establish a valuation allowance by a charge to income tax expense. Depending upon the nature of the limitations, such a charge could be material to our results of operations in the period of enactment.Operate

We face significant and increasing competition in the financial services industry. We operate in a highly competitive environment. Over time, there has been substantial consolidation among companies in the financial services industry, and this trend accelerated in recent years. This trend has also hastened the globalization of the securities and financial services markets. We will continue to experience intensified competition as consolidation and globalization of the financial services industry may produce larger, better-capitalized and more geographically diverse companies that are capable of offering a wider array of financial products and services at more competitive prices. To the extent we expand into new business areas and new geographic regions, we may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our ability to compete. In addition, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally

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~~Risk~~were ofbanking ~~the~~products, ~~Competitive~~and ~~Environment~~for financial institutions to compete with technology companies in ~~Which~~providing Weelectronic ~~Operate~~and internet-based financial solutions. Increased competition may negatively affect our earnings by creating pressure to lower prices on our products and services and/or reducing market share.

WeDamage ~~face~~to ~~significant~~our ~~and~~reputation ~~increasing~~could ~~competition~~significantly inharm ~~the~~our ~~financial~~businesses, ~~services~~including ~~industry. We~~our ~~operate in a highly~~ competitive ~~environment.~~position ~~Over time, there has been substantial consolidation among companies in the financial services industry,~~ and ~~this~~business ~~trend accelerated in recent years~~prospects. ~~This~~ Our ~~trend~~ability ~~has also hastened the globalization of the securities and financial services markets. We will continue~~ to ~~experience~~attract ~~intensified competition as consolidation~~ and ~~globalization~~retain ~~of the financial services industry may produce larger~~customers, better-capitalized and more geographically diverse companies that are capable of offering a wider array of financial products and services at more competitive prices. To the extent we expand into new business areas and new geographic regions, we may face competitors with more experience and more established relationships with clients, ~~regulators~~investors and ~~industry~~employees ~~participants~~is inimpacted ~~the~~by ~~relevant market, which could adversely affect~~ our ~~ability to compete~~reputation. We Incontinue ~~addition, technological advances and the growth of e-commerce have made it possible for non-depository institutions~~ to ~~offer~~face ~~products~~increased public and ~~services~~regulatory ~~that~~scrutiny ~~traditionally~~resulting ~~were~~from ~~banking~~the ~~products, and for~~ financial ~~institutions~~crisis ~~to compete with technology companies in providing electronic~~ and ~~internet-based~~economic ~~financial~~downturn, ~~solutions.~~as ~~Increased~~well ~~competition~~as ~~may negatively affect~~ our ~~results~~acquisition ~~of operations~~ by ~~creating~~Bank ~~pressure~~of toAmerica ~~lower~~and ~~prices~~the onsuitability ~~our~~or ~~products~~reasonableness ~~and~~of ~~services~~recommending ~~and~~particular ~~reducing~~trading ~~market~~or ~~share~~investment strategies.

Damage to our reputation could significantly harm our businesses, including our competitive position and business prospects. Our ability to attract and retain customers, clients, investors and employees is impacted by our reputation. Public perception of us and others in the financial services industry appeared to decline in 2011. We continue to face increased public and regulatory scrutiny resulting from the financial crisis and economic downturn, as well as our acquisition by Bank of America and the suitability or reasonableness of recommending particular trading or investment strategies.

Significant harm to our reputation can also arise from other sources, including indirectly as a result of actions by Bank of America or damage to its reputation, employee misconduct, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, unethical behavior, unintended disclosure of confidential information, and the activities of our clients, customers and counterparties, including vendors. Actions by the financial services industry generally or by certain members or individuals in the industry also can significantly adversely affect our reputation.

We are subject to complex and evolving laws and regulations regarding privacy, data protections and other matters.

Principles concerning the appropriate scope of consumer and commercial privacy vary considerably in different jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy may remain fluid ~~into~~in the future. It is possible that these laws may be interpreted and applied by various jurisdictions in a manner ~~that is~~ inconsistent with our current or future practices, or that is inconsistent with one another. We face regulatory, reputational and operational risks if personal, confidential or proprietary information of customers or clients in our possession is mishandled or misused.

We could suffer significant reputational harm if we fail to properly identify and manage potential conflicts of interest. Management of potential conflicts of interest has become increasingly complex as we expand our business activities through more numerous transactions, obligations and interests with and among our clients. The failure to adequately address, or the perceived failure to adequately address, conflicts of interest could affect the willingness of clients to deal with us, or give rise to litigation or enforcement actions, which could adversely affect our businesses.

Our actual or perceived failure to address these and other issues gives rise to reputational risk that could cause significant harm to us and our business prospects, including failure to properly address operational risks. Failure to appropriately address any of these issues could also give rise to additional regulatory restrictions, legal risks and reputational harm, which could, among other consequences, increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses.

Our ability to attract and retain qualified employees is critical to the success of our ~~businesses~~business and failure to do so could ~~adversely~~hurt ~~affect~~ our business prospects, ~~including~~and ~~our~~ competitive position ~~and results of operations~~. Our performance is heavily dependent on the talents and efforts of highly skilled individuals. Competition for qualified personnel within the financial services industry and from businesses outside the financial services industry has been, and is expected to continue to be, intense. Our competitors include non-U.S.-based institutions and institutions subject to different compensation and hiring regulations than those imposed on U.S. institutions and financial institutions. The difficulty we face in competing for key personnel is exacerbated in emerging markets, where we are often competing for qualified employees with entities that may have a significantly greater presence or more extensive experience in the region.

In order to attract and retain qualified personnel, we must provide market-level compensation. As a subsidiary of Bank of America, we may be subject to limitations on compensation practices (which may or may not affect our competitors) by regulators in the U.S. or around the world. Any future limitations on executive compensation imposed by legislation or regulation could adversely affect our ability to attract and maintain qualified employees. Furthermore, a substantial portion of our annual incentive compensation paid to our senior employees has in recent years taken the form of long-term equity awards. Therefore, the ultimate value of of this compensation depends on the price of Bank of America's common stock when the awards vest. If we are unable to continue to attract and retain qualified individuals, our business prospects and competitive position could be adversely affected.

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~~been,~~In ~~and is expected to continue to be~~addition, ~~intense.~~if ~~Our~~we ~~competitors~~fail ~~include non-U.S.-based institutions and institutions otherwise not subject~~ to ~~compensation~~retain ~~and~~the ~~hiring~~wealth ~~regulations~~advisors ~~imposed~~that ~~on U.S. institutions and financial institutions in particular. The difficulty~~ we ~~face~~employ in ~~competing~~our ~~for~~wealth ~~key~~and ~~personnel~~investment ismanagement ~~exacerbated in emerging markets~~business, ~~where~~particularly wethose ~~are~~with ~~often~~significant ~~competing~~client ~~for~~relationships, ~~qualified~~such ~~employees~~failure ~~with~~could ~~entities~~result ~~that~~in ~~may have~~ a ~~significantly~~significant ~~greater~~loss ~~presence~~of clients or ~~more~~the ~~extensive~~withdrawal ~~experience~~of insignificant ~~the~~client ~~region~~assets.

In order to attract and retain qualified personnel, we must provide market-level compensation. As a subsidiary of Bank of America, we may be subject to limitations on compensation practices (which may or may not affect our competitors) by regulators in the U.S. or around the world. Any future limitations on executive compensation imposed by legislation or regulation could adversely affect our ability to attract and maintain qualified employees. Furthermore, a substantial portion of our annual bonus compensation paid to our senior employees has in recent years taken the form of long-term equity awards. The value of long-term equity awards to senior employees generally has been negatively affected by the significant decline in the market price of Bank of America's common stock. If we are unable to continue to attract and retain qualified individuals, our business prospects, including our competitive position and results of operations, could be adversely affected.

In addition, if we fail to retain the wealth advisors that we employ in our wealth and investment management business, particularly those with significant client relationships, such failure could result in a significant loss of clients or the withdrawal of significant client assets. Any such loss or withdrawal could adversely impact our wealth and investment management business activities and our financial condition, results of operations and cash flows.

We may not be able to achieve expected cost savings from cost-saving initiatives, including from Project New BAC, or in accordance with currently anticipated time frames. We are currently engaged in numerous efforts to achieve certain cost savings, including, among other things, Project New BAC.

Project New BAC is a two-phase, enterprise-wide initiative to simplify and streamline workflows and processes, align businesses and costs more closely with Bank of America's overall strategic plan and operating principles, and increase revenues. Phase 1 focused on Bank of America's consumer businesses and related support, technology and operations functions. Phase 2 focuses on businesses and related support, technology and operations functions not subject to evaluation in Phase 1. All aspects of Phase 1 of Project New BAC are currently expected to be implemented by the end of ~~2014~~2013, with Phase 2 expected to be fully implemented by mid-2015.

We may be unable to fully realize the cost savings and other anticipated benefits from our cost saving initiatives, or in accordance with currently anticipated timeframes.

Our inability to adapt our products and services to evolving industry standards and consumer preferences could harm our ~~businesses~~business. Our success depends, ~~in part,~~ on our ability to adapt our products and services to evolving industry standards. There is increasing pressure by competitors to provide products and services at lower prices. This can reduce our revenues from our fee-based products and services. In addition, the widespread adoption of new technologies, including internet services, could require us to incur substantial expenditures to modify or adapt our existing products and services. We might not be successful in developing or introducing new products and services, responding or adapting to changes in consumer spending and saving habits, achieving market acceptance of our products and services, or sufficiently developing and maintaining loyal customers.

Risks Related to Risk Management

Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses. Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor, report and control our exposure to the types of risk to which we are subject, including strategic, credit, market, liquidity, compliance, operational and reputational risks, among others. While we employ a broad and diversified set of risk monitoring and mitigation techniques, those techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions, heightened legislative and regulatory scrutiny of the financial services industry and increases in the overall complexity of our operations, among other developments, have resulted in a heightened level of risk for us. Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks~~, including all correlations and downstream secondary or follow-on effects that occur~~.

A failure in or breach of our operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses. Our business is highly dependent on our ability to process, record and monitor, on a continuous basis, a large number of transactions, many of which are highly complex, across numerous and diverse markets in many currencies. The potential for operational risk exposure exists throughout our organization, and is not limited to operations functions. Operational risk exposures can impact our results of operations, such as losses resulting from unauthorized trades by employees, and their impact may extend beyond financial losses.

Integral to our performance is the continued efficacy of our internal processes, systems, relationships with third parties and the vast array of employees and key executives in our day-to-day and ongoing operations. With regard to the physical infrastructure and systems that support our operations, we have taken measures to implement backup systems and other safeguards, but our ability to conduct business may be adversely affected by any significant and widespread disruption to our infrastructure or systems. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our ability to process these transactions or provide these services. There could be sudden increases in customer transaction volume;

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Aelectrical ~~failure in~~ or ~~breach~~telecommunications ofoutages; ~~our~~natural ~~operational~~disasters orsuch ~~security systems or infrastructure, or those of third parties with which we do business, including~~ as ~~a result of cyber attacks~~earthquakes, ~~could~~tornadoes ~~disrupt~~and ~~our~~hurricanes; ~~businesses,~~disease ~~result~~pandemics; inevents ~~the~~arising ~~disclosure~~from local or ~~misuse~~larger ofscale ~~confidential~~political or ~~proprietary~~social ~~information~~matters, ~~damage~~including ~~our~~terrorist ~~reputation,~~acts; ~~increase our costs~~ and ~~cause~~cyber ~~losses~~attacks. ~~Any~~We ~~such~~continuously ~~failure~~update ~~also~~these ~~could~~systems ~~have~~to asupport ~~material adverse effect on~~ our ~~business,~~operations ~~financial condition~~ and ~~results of operations~~growth. ~~Our~~ ~~business~~This isupdating ~~highly~~entails ~~dependent~~significant oncosts ~~our ability to process, record~~ and ~~monitor,~~creates onrisks aassociated ~~continuous~~with ~~basis,~~implementing anew ~~large~~systems ~~number of transactions, many of which are highly complex, across numerous~~ and ~~diverse~~integrating ~~markets~~them inwith ~~many~~existing ~~currencies~~ones. ~~The potential for operational risk exposure exists throughout our organization, including losses resulting from unauthorized trades by any employees.~~

~~Integral~~Information tosecurity ~~our~~risks ~~performance~~for islarge ~~the~~financial ~~continued~~institutions ~~efficacy~~such as Bank of ~~our~~America ~~internal~~and ~~processes,~~Merrill ~~systems,~~Lynch ~~relationships~~have ~~with~~significantly ~~third~~increased ~~parties~~in ~~and~~recent years in part because of the ~~vast~~proliferation ~~array~~of new technologies, the use of ~~employees~~the Internet and ~~key~~telecommunications ~~executives~~technologies into ~~our~~conduct ~~day-to-day~~financial transactions, and ~~ongoing~~the ~~operations.~~increased ~~With~~sophistication ~~regard~~and toactivities ~~the~~of ~~physical~~organized ~~infrastructure~~crime, hackers, terrorists and ~~systems~~other ~~that~~external ~~support~~parties, ~~our~~including foreign state actors. Our operations, werely ~~have~~on ~~taken~~the ~~measures~~secure toprocessing, ~~implement~~transmission ~~backup~~and ~~systems~~storage of confidential, proprietary and other ~~safeguards,~~information ~~but~~in our ~~ability~~computer tosystems ~~conduct~~and ~~business~~networks. ~~may~~We berely ~~adversely~~on ~~affected~~our bydigital ~~any~~technologies, ~~significant~~computer and ~~widespread~~email ~~disruption~~systems, tosoftware, ~~our~~and ~~infrastructure~~networks orto ~~systems~~conduct our operations. ~~Our~~In ~~financial~~addition, ~~accounting~~to access our products and services, ~~data~~our ~~processing~~customers may use personal smartphones, ~~backup~~PCs orand other ~~operating~~computing ~~systems~~devices, tablet PCs, and ~~facilities~~other ~~may~~mobile ~~fail~~devices tothat ~~operate~~are ~~properly~~beyond orour ~~become~~control ~~disabled~~systems. orOur ~~damaged~~technologies, assystems, anetworks, ~~result~~and ofour acustomers' ~~number~~devices ofhave ~~factors~~been ~~including~~subject ~~events~~to, ~~that~~and are ~~wholly~~likely orto ~~partially~~continue ~~beyond~~to ~~our~~be ~~control~~the ~~and~~target ~~adversely~~of, ~~affect~~cyber ~~our~~attacks, ~~ability~~computer toviruses, ~~process~~malicious ~~these~~code, ~~transactions~~phishing attacks or ~~provide~~information ~~these~~security ~~services.~~breaches ~~There~~that could beresult ~~sudden~~in ~~increases~~the inunauthorized ~~customer~~release, ~~transaction~~gathering, ~~volume;~~monitoring, ~~electrical~~misuse, loss or ~~telecommunications~~destruction ~~outages;~~of ~~natural~~our ~~disasters~~or ~~such~~our ascustomers' ~~earthquakes~~confidential, ~~tornadoes~~proprietary and ~~hurricanes;~~other ~~disease~~information, ~~pandemics;~~or ~~events~~otherwise ~~arising~~disrupt ~~from~~our ~~local~~or our customers' or ~~larger~~other ~~scale~~third ~~political~~parties' orbusiness ~~social~~operations. For ~~matters~~example, ~~including~~our ~~terrorist~~websites ~~acts;~~have ~~and~~been subject to a series of distributed denial of service cyber ~~attacks~~security incidents. WeAlthough ~~continuously~~these ~~update~~incidents ~~these~~have ~~systems~~not tohad ~~support~~a ~~our~~material ~~operations~~impact ~~and~~on ~~growth.~~Merrill ~~This~~Lynch, ~~updating~~nor ~~entails~~have ~~significant~~they ~~costs~~resulted ~~and~~in ~~creates~~unauthorized ~~risks~~access ~~associated~~to ~~with~~our ~~implementing~~or ~~new~~our ~~systems~~customers' ~~and~~confidential, ~~integrating~~proprietary ~~them~~or ~~with~~other ~~existing~~information, ~~ones~~because of our prominence, we believe that such incidents may continue.

~~Information~~Although ~~security~~to ~~risks~~date ~~for~~we ~~large~~have ~~financial~~not ~~institutions~~experienced ~~such~~any asmaterial ~~Bank~~losses ofrelating ~~America~~to ~~and~~cyber ~~Merrill~~attacks ~~Lynch~~or ~~have~~other ~~significantly~~information ~~increased~~security inbreaches, ~~recent~~there ~~years~~can inbe ~~part~~no ~~because~~assurance ofthat ~~the~~we ~~proliferation~~will ofnot ~~new~~suffer ~~technologies,~~such ~~the~~losses ~~use~~in of the ~~Internet~~future. ~~and~~Our ~~telecommunications~~risk ~~technologies to conduct financial transactions,~~ and ~~the~~exposure ~~increased~~to ~~sophistication~~these ~~and~~matters ~~activities~~remains ofheightened ~~organized~~because ~~crime~~of, ~~hackers,~~among ~~terrorists and~~ other ~~external parties~~things, ~~including~~the ~~foreign~~evolving ~~state~~nature ~~actors.~~of ~~Our~~these ~~operations~~threats, ~~rely on~~ the ~~secure~~prominent ~~processing,~~size ~~transmission~~ and ~~storage~~scale of ~~confidential,~~Bank ~~proprietary~~of America and ~~other~~Merrill ~~information~~Lynch inand ~~our~~their ~~computer~~roles ~~systems~~in ~~and~~the ~~networks.~~financial Weservices ~~rely~~industry, ontheir ~~our~~expanded ~~digital~~geographic ~~technologies,~~footprint ~~computer~~ and ~~email~~international ~~systems~~presence, ~~software,~~the ~~and~~outsourcing ~~networks~~of tosome ~~conduct~~of ~~our~~their ~~operations.~~business ~~In addition~~operations, tothe ~~access~~continued ~~our~~uncertain ~~products~~global ~~and~~economic ~~services~~environment, ~~our~~threats ~~customers~~of ~~may use personal smartphones~~cyberterrorism, ~~tablet~~and ~~PCs,~~system and ~~other~~customer ~~mobile~~account ~~devices that are beyond our control systems~~conversions. As ~~Our~~a ~~technologies~~result, ~~systems,~~cybersecurity ~~networks,~~ and ~~our~~the ~~customers'~~continued ~~devices~~development ~~have~~and ~~been~~enhancement ~~subject~~of toour controls, processes and ~~are~~practices ~~likely~~designed to ~~continue~~protect toour besystems, ~~the target of~~computers, ~~cyber~~ ~~attacks~~software, ~~computer~~data ~~viruses,~~and ~~malicious~~networks ~~code~~from attack, ~~phishing~~damage ~~attacks~~ or ~~information~~unauthorized ~~security~~access ~~breaches~~remain ~~that~~a ~~could~~priority ~~result~~for inus. ~~the~~As ~~unauthorized~~cyber ~~release,~~threats ~~gathering,~~continue ~~monitoring,~~to ~~misuse~~evolve, ~~loss~~we ormay ~~destruction~~be ofrequired ~~our~~to orexpend ~~our~~significant ~~customers'~~additional ~~confidential,~~resources ~~proprietary~~to ~~and~~continue ~~other~~to ~~information,~~modify or ~~otherwise~~enhance ~~disrupt~~ our orprotective ~~our~~measures ~~customers'~~ or ~~other~~to ~~third~~investigate ~~parties'~~and ~~business~~remediate ~~operations. Because~~any ofinformation ~~our~~security ~~prominence, we believe that such attacks may continue~~vulnerabilities.

~~Although~~In toaddition, ~~date~~ we ~~have~~also ~~not~~face ~~experienced~~the ~~any~~risk ~~material~~of ~~losses~~operational ~~relating~~failure, totermination ~~cyber attacks~~ or ~~other~~capacity ~~information~~constraints ~~security~~of ~~breaches,~~any ~~there~~of ~~can~~the bethird noparties ~~assurance~~with ~~that~~which we ~~will~~do ~~not~~business ~~suffer~~or ~~such~~that ~~losses~~facilitate inour ~~the~~business ~~future.~~activities, ~~Our~~including ~~risk~~clearing ~~and~~agents, ~~exposure~~exchanges, toclearing ~~these~~houses ~~matters~~or ~~remains~~other ~~heightened~~financial ~~because~~intermediaries ~~of,~~we ~~among~~use ~~other~~to ~~things,~~facilitate ~~the~~our ~~evolving~~securities ~~nature~~transactions. ofIn ~~these~~recent ~~threats~~years, ~~the~~there ~~prominent~~has ~~size~~been ~~and~~significant ~~scale~~consolidation ofamong ~~Bank~~clearing ofagents, ~~America~~exchanges and ~~Merrill~~clearing ~~Lynch~~houses and ~~their~~increased ~~roles~~interconnectivity inof ~~the~~multiple financial ~~services~~institutions ~~industry,~~with ~~their~~central ~~expanded~~agents, ~~geographic~~exchanges ~~footprint~~ and ~~international~~clearing ~~presence,~~houses. ~~the~~This ~~outsourcing~~consolidation ofand ~~some~~interconnectivity ofincreases ~~their business operations,~~ the ~~continued~~risk ~~uncertain~~of ~~global~~operational ~~economic environment~~failure, ~~and~~on ~~system~~both individual and ~~customer~~industry-wide ~~account conversions. As a result~~bases, ~~cybersecurity~~as ~~and~~disparate ~~the~~complex ~~continued~~systems ~~development~~need ~~and~~to ~~enhancement~~be ~~of our controls~~integrated, ~~processes~~often ~~and~~on ~~practices~~an ~~designed~~accelerated tobasis. ~~protect~~Any ~~our~~such ~~systems~~failure, ~~computers,~~termination ~~software, data and networks from attack, damage~~ or ~~unauthorized~~constraint ~~access~~could ~~remain~~adversely aaffect ~~priority~~our ~~for~~ability ~~us.~~to Aseffect ~~cyber~~transactions, ~~threats~~service ~~continue~~our ~~to evolve~~clients, wemanage ~~may~~our beexposure ~~required~~ to ~~expend~~risk ~~significant~~or ~~additional~~expand ~~resources~~our tobusinesses ~~continue~~and tocould ~~modify~~have oran ~~enhance~~adverse ~~our~~impact ~~protective~~on ~~measures~~our orliquidity, tofinancial ~~investigate~~condition and ~~remediate~~results ~~any~~of ~~information security vulnerabilities~~operations.

InDisruptions ~~addition,~~or wefailures ~~also~~in ~~face~~ the ~~risk~~physical ofinfrastructure ~~operational~~or ~~failure,~~operating ~~termination~~systems that support our business and customers, or ~~capacity~~cyber ~~constraints~~attacks ofor ~~any~~security breaches of the ~~third~~networks, ~~parties~~systems ~~with~~or ~~which~~devices wethat doour ~~business~~customers oruse ~~that~~to ~~facilitate~~access our ~~business~~products ~~activities,~~and ~~including~~services ~~clearing~~could ~~agents,~~result ~~exchanges,~~in ~~clearing~~the ~~houses~~loss orof ~~other~~customers ~~financial~~and ~~intermediaries~~business weopportunities, ~~use~~significant tobusiness ~~facilitate~~disruption to our ~~securities~~operations ~~transactions.~~and Inbusiness, ~~recent~~misappropriation ~~years,~~of ~~there~~our ~~has~~confidential ~~been~~information ~~significant~~and/or ~~consolidation~~that ~~among~~of ~~clearing~~our ~~agents~~customers, ~~exchanges~~or damage to our computers or systems and ~~clearing~~those ~~houses~~of our customers and/or ~~increased~~counterparties, ~~interconnectivity~~and ofcould ~~multiple~~result ~~financial~~in ~~institutions~~violations ~~with~~of ~~central~~applicable ~~agents,~~privacy ~~exchanges~~laws and ~~clearing~~other ~~houses.~~laws, ~~This~~litigation ~~consolidation~~exposure, ~~and~~regulatory ~~interconnectivity~~fines, ~~increases~~penalties ~~the~~or ~~risk~~intervention, loss of ~~operational~~confidence ~~failure~~in our security measures, onreputational ~~both~~damage, ~~individual~~reimbursement or other compensatory costs, and ~~industry-wide~~additional compliance costs.

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bases, as disparate complex systems need to be integrated, often on an accelerated basis. Any such failure, termination or constraint could adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our businesses and could have a significant adverse impact on our liquidity, financial condition and results of operations.

Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber attacks or security breaches of the networks, systems or devices that our customers use to access our products and services could result in the loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, any of which could materially adversely affect our business, financial condition and results of operations.

Risk of Being an International Business

We are subject to numerous political, economic, market, reputational, operational, legal, regulatory and other risks in the non-U.S. jurisdictions in which we operate ~~which could adversely impact our businesses, financial condition and results of operations~~. We do business throughout the world, including in developing regions of the world commonly known as emerging markets. Our businesses and revenues derived from non-U.S. jurisdictions are subject to risk of loss from currency fluctuations, social or judicial instability, changes in governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, capital controls, exchange controls, other restrictive actions, unfavorable political and diplomatic developments and changes in legislation. These risks are especially acute in emerging markets. Many non-U.S. jurisdictions in which we do business have been negatively impacted by recessionary conditions. While a number of these jurisdictions are showing signs of recovery, others continue to experience increasing levels of stress. In addition, the increasing potential risk of default on sovereign debt in some non-U.S. jurisdictions could expose us to substantial losses. Risks in one country can affect our operations in another country or countries, including our operations in the U.S. As a result, any such unfavorable conditions or developments could have an adverse impact on our ~~businesses, financial condition and results of operations~~company.

Our non-U.S. businesses are also subject to extensive regulation by various non-U.S. regulators, including governments, securities exchanges, central banks and other regulatory bodies, in the jurisdictions in which those businesses operate. In many countries, the laws and regulations applicable to the financial services and securities industries are uncertain and evolving, and it may be difficult for us to determine the exact requirements of local laws in every market or manage our relationships with multiple regulators in various jurisdictions. Our inability to remain in compliance with local laws in a particular market and manage our relationships with regulators could have aan ~~significant and~~ adverse effect not only on our businesses in that market but also on our reputation generally.

We also invest or trade in the securities of corporations and governments located in non-U.S. jurisdictions, including emerging markets. Revenues from the trading of non-U.S. securities may be subject to negative fluctuations as a result of the above factors. Furthermore, the impact of these fluctuations could be magnified because non-U.S. trading markets, particularly in emerging market countries, are generally smaller, less liquid and more volatile than U.S. trading markets.

In addition to non-U.S. legislation, our international operations are also subject to U.S. legal requirements. For example, our international operations are subject to U.S. laws on foreign corrupt practices, the Office of Foreign Assets Control, and anti-money laundering regulations. Additionally, we are subject to Section 13(r) of the Securities Exchange Act of 1934, which requires a registrant to provide disclosure in its periodic reports and file a notice with the SEC if it or its affiliates knowingly engage in certain activities identified under the Iran Threat Reduction and Syria Human Rights Act of 2012. The SEC is required to report any such disclosure to the U.S. President and certain Congressional committees. The President thereafter is required to initiate an investigation into the reported activity and, within 180 days of initiating such an investigation, determine whether sanctions should be imposed. If we are required to report any such activities, whether or not any sanctions are actually imposed on us or our affiliates as a result of these activities, our reputation could be harmed and our results of operations could be adversely impacted.

We are subject to geopolitical risks, including acts or threats of terrorism, and actions taken by the U.S. or other governments in response thereto and/or military conflicts that could adversely affect business and economic conditions abroad as well as in the U.S.

Risk from Accounting Changes

Changes in accounting standards or inaccurate estimates or assumptions in ~~the~~applying ~~application of~~ accounting policies could adversely affect ~~our financial condition and results of operations~~us. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported value of our assets or liabilities and results of operations and are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. If those assumptions, estimates or judgments were incorrectly made, we could be required to correct and restate prior-period financial statements.

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Accounting standard-setters and those who interpret the accounting standards (such as the Financial Accounting Standards Board (the "FASB"), the SEC and our independent registered public accounting firm) may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes ~~can~~may be difficult to predict and ~~can~~could ~~materially~~ impact how we ~~record~~prepare and report our financial ~~condition and results of operations~~statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in Merrill Lynch needing to revise and republish prior-period financial statements. ~~For further information on some of our critical accounting policies and standards and recent accounting changes, see Note 1 to the Consolidated Financial Statements.~~

On December 20, 2012, the FASB issued a proposed standard on accounting for expected credit losses. The standard would replace multiple existing impairment models, including replacing an “incurred loss” model for loans with an “expected credit loss” model. The FASB announced it will establish the effective date when it issues the final standard. We cannot predict whether or when a final standard will be issued, when it will be effective or what its final provisions will be. It is possible that the final standard could have a material adverse impact on our consolidated results of operations once it is issued and becomes effective.

For further information on some of our critical accounting policies and standards and recent accounting changes, see Note 1 to the Consolidated Financial Statements.

Risk of Being a Wholly-Owned Subsidiary

We are a direct wholly-owned subsidiary of Bank of America and therefore are subject to strategic decisions of Bank of America and affected by Bank of America’s performance. We are fundamentally affected by our relationship with Bank of America. As a direct wholly-owned subsidiary of Bank of America, we are subject to a wide range of possible strategic decisions that Bank of America may make from time to time. Those strategic decisions could include the level and types of financing and other support made available to us by Bank of America. In addition, circumstances and events affecting Bank of America can significantly affect us. For example, the primary drivers of our credit ratings are Bank of America’s credit ratings, and when rating agencies take actions regarding Bank of America’s credit ratings and outlooks, they generally take the same actions with respect to our ratings and outlooks. Also, we have several borrowing arrangements and a globally coordinated funding strategy with Bank of America. Significant changes in Bank of America’s strategy or its relationship with us could have a material adverse effect on our business. Material adverse changes in the performance of Bank of America or its other subsidiaries could have a material adverse effect on our results of operations, financial condition and liquidity. We are indirectly exposed, therefore, to many of the risks to which Bank of America is directly exposed. 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.

As a wholly-owned subsidiary of Bank of America, a bank holding company that is also a financial holding company, we are subject to the oversight of, and inspection by, the Federal Reserve. If Bank of America does not comply with regulatory requirements applicable to banking institutions with respect to regulatory capital, capital ratios and liquidity and required increases in the foregoing, our liquidity would be adversely affected. In order to comply with such requirements, Bank of America may be required to liquidate company assets, among other actions. Our activities are limited to those that are permissible for Bank of America under applicable laws and regulations. As a financial holding company, Bank of America (directly or through its subsidiaries) may engage in activities that are “financial in nature.” Bank of America’s status as a financial holding company requires, among other conditions, that each of its subsidiary insured depository institutions be well-capitalized and well-managed. Failure to satisfy these conditions may result in the Federal Reserve limiting the activities of Bank of America, which thereby could restrict our current business activities, require divestiture of certain of our assets and operations or limit potential future strategic plans.


Item 1B.	Unresolved Staff Comments

Not applicable.

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Item 2.	Properties

As of December 31, ~~2011~~2012, our principal offices and other materially important properties consisted of the following:

Facility Name	Location	General Character of the Physical Property	Property Status	Property Sq. Ft. (1)
4 World Financial Center	New York, NY	34 Story Building	Leased	1,~~806~~636,~~365~~512
2 World Financial Center	New York, NY	44 Story Building	Leased	~~504~~674,~~896~~726
Hopewell Campus	Hopewell, NJ	8 Building Campus with 4 Ancillary Buildings	~~Owned~~Leased	1,~~787~~788,~~811~~961
Jacksonville Campus	Jacksonville, FL	4 Building Campus	Owned	577,402
Merrill Lynch Financial Center	London, UK	4 Building Campus	Leased	568,307
Merrill Lynch Financial Centre	London, UK	4 Building Campus	Leased	568,256
Nihonbashi 1-Chome Building	Tokyo, Japan	24 Story Building	Leased	~~263~~208,~~723~~498

(1) For leased properties, Property Sq. Ft. represents the square footage occupied by Merrill Lynch.

Our principal executive offices are located at Bank of America Corporate Center in Charlotte, North Carolina, which is owned by one of Bank of America's subsidiaries. In addition, we have employees located at Bank of America Tower at One Bryant Park in New York, New York.

We believe our owned and leased properties are adequate for our business needs and are well maintained. We continue to evaluate our owned and leased real estate and may determine from time to time that certain of our premises and facilities, or ownership structures, are no longer necessary for our operations. In connection therewith, we are evaluating the sale or sale / leaseback of certain properties and we may incur costs in connection with any such transactions.


Item 3.	Legal Proceedings

Refer to "Litigation and Regulatory Matters" in Note 14 to the Consolidated Financial Statements in Part II, Item 8, which is incorporated herein by reference.


Item 4.	Mine Safety Disclosures

None.

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PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

ML & Co. made no purchases of its common stock during the year ended December 31, ~~2011~~2012. There were 1,000 shares of ML & Co. common stock outstanding as of December 31, ~~2011~~2012, all of which were held by Bank of America Corporation.

Dividends Per Common Share

As of the date of this report, Bank of America is the sole holder of the outstanding common stock of ML & Co. There is no trading market for ML & Co. common stock. No cash dividends were declared or paid for the years ended December 31, ~~2011~~2012 and ~~2010~~2011. With the exception of regulatory restrictions on subsidiaries’ abilities to pay dividends, there were no restrictions on ML & Co.’s present ability to pay dividends on common stock, other than ML & Co.’s obligation to make payments on its junior subordinated debt related to trust preferred securities, and the governing provisions of Delaware General Corporation Law.

Securities Authorized for Issuance under Equity Compensation Plans

There are no equity securities of ML & Co. that are authorized for issuance under any equity compensation plans. Refer to Note 15 and Note 16 ofto the Consolidated Financial Statements for further information on employee benefit and equity compensation plans.


Item 6.	Selected Financial Data

Not required pursuant to General Instruction I (2).

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report on Form 10-K, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Merrill Lynch & Co., Inc. (“ML & Co. and, together with its subsidiaries, “Merrill Lynch,” the “Company,” "we,” “our” or “us”) and its management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, “we,” “us” and “our” may refer to ML & Co. individually, ML & Co. and its subsidiaries, or certain of ML & Co.'s subsidiaries or affiliates. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “goal” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” The forward-looking statements made represent the current expectations, plans or forecasts of Merrill Lynch regarding its future results and revenues and future business and economic conditions more generally, including statements concerning: the potential impacts of the European Union ("EU") sovereign debt crisis; the impact of the United Kingdom (the "U.K.") 2011 Finance Bill and review by the U.K. Financial Services Authority; the charge to income for each one percent reduction in the U.K. corporate income tax rate; the planned schedule and details for implementation and completion of, and the expected impact from, Phase 1 and Phase 2 of Project New BAC, including expected reductions in employment levels; the belief that the representations and warranties provision recorded in the year ended December 31, 2011 has provided for a substantial portion of Merrill Lynch's non-government sponsored enterprises ("GSEs") repurchase claims; the estimated range of possible loss for non-GSE representations and warranties exposure as of December 31, 2011 of up to $0.5 billion over existing accruals; Merrill Lynch's intention to vigorously contest any requests for repurchase for which it concludes that a valid basis does not exist; the net recovery projections for credit default swaps with monoline financial guarantors; the impact on economic conditions and Merrill Lynch arising from further changes to the credit rating or perceived creditworthiness of instruments issued, insured or guaranteed by the U.S. government, or of institutions, agencies or instrumentalities directly linked to the U.S. government; the realizability of deferred tax assets prior to expiration of any carryforward periods; credit trends and conditions, including credit losses, credit reserves, charge-offs, delinquency trends and nonperforming asset levels; investment banking fees; sales and trading revenues; liquidity; the revenue impact resulting from, and any mitigation actions taken in response to, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”), including, but not limited to, the Volcker Rule; that it is our objective to maintain high-quality credit ratings; the estimated range of possible loss from and the impact on Merrill Lynch of various legal proceedings discussed in Note 14 to the Consolidated Financial Statements; our estimates of contributions to be made to pension plans; our interest rate risk management strategies and models; our trading risk management processes; and other matters relating to Merrill Lynch. The foregoing is not an exclusive list of all forward-looking statements we make. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond our control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

~~You~~incorporated ~~should~~by ~~not~~reference ~~place~~may ~~undue~~contain, ~~reliance~~and onfrom ~~any~~time ~~forward-looking~~to ~~statement~~time Merrill Lynch & Co., Inc. (“ML & Co. and, ~~should~~collectively ~~consider~~with its subsidiaries, “Merrill Lynch,” the ~~following~~“Company,” ~~uncertainties~~"we,” “our” or “us”) and ~~risks,~~its asmanagement ~~well~~may asmake certain statements that constitute forward-looking statements within the ~~risks~~meaning ~~and~~of ~~uncertainties~~the ~~more~~Private ~~fully~~Securities ~~discussed~~Litigation ~~elsewhere~~Reform Act of 1995. When used in this report, ~~under Item 1A.~~“we,” “~~Risk~~us” ~~Factors~~and “our” ofmay ~~this~~refer ~~report~~to ML & Co. individually, ML & Co. and inits ~~any~~subsidiaries, or certain of ML & Co.'s ~~subsequent~~subsidiaries ~~Securities~~or ~~and~~affiliates. ~~Exchange~~These ~~Commission~~statements ~~(“SEC”)~~can ~~filings: Merrill~~be ~~Lynch's~~identified ~~ability~~by the fact that they do not relate strictly to ~~resolve~~historical ~~its~~or ~~representations~~current ~~and~~facts. ~~warranties~~Forward-looking ~~obligations~~statements often use words such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “goal” and ~~any~~other ~~related~~similar ~~servicing~~expressions or future or conditional verbs such as “will,” ~~securities~~“may,” ~~fraud~~“might,” ~~indemnity~~“should,” “would” and “could.” The forward-looking statements made represent the current expectations, plans or ~~other~~forecasts ~~claims~~of ~~with~~Merrill ~~monolines~~Lynch regarding its future results and revenues and future business and economic conditions more generally, including statements concerning: that Merrill Lynch would record a charge to income tax expense of approximately $800 million if the income tax rate were reduced to 21% by 2014 as suggested in United Kingdom ("U.K.") Treasury announcements and assuming no change in the deferred tax asset balance; the expectation that unresolved repurchase claims related to private-label ~~investors~~securitization trustees will continue to increase; the resolution of representations and warranties repurchase and other ~~investors,~~claims; ~~including~~the ~~those~~final ~~monolines~~resolution of the BNY Mellon Settlement; the estimates of liability and ~~investors~~range ~~from~~of ~~whom~~possible loss for representations and warranties repurchase claims; the possibility that future representations and warranties losses may occur in excess of the amounts recorded for those exposures; Merrill Lynch's ~~has~~intention ~~not~~to ~~yet~~vigorously ~~received~~contest ~~claims~~any orrequests ~~with~~for ~~whom~~repurchase for which it ~~has~~concludes that a valid basis does not ~~yet~~exist; ~~reached~~that swap dealers will continue to be subject to additional Commodity Futures Trading Commission rules as and when such rules take effect; the realizability of deferred tax assets prior to expiration of any ~~resolutions~~carryforward periods; effects of the ~~identification~~ongoing ~~and~~debt ~~effectiveness~~crisis in Europe, including the expectation of continued volatility as long as challenges remain, the expectation that Merrill Lynch will continue to support client activities in the region and that exposures may vary over time as Merrill Lynch monitors the situation and manages its risk profile; liquidity; the revenue impact resulting from, and any ~~initiatives~~mitigation actions taken in response to, ~~mitigate~~the Dodd-Frank Wall Street Reform and Consumer Protection Act, including, but not limited to, the ~~negative~~Volcker Rule; that it is our objective to maintain high-quality credit ratings; the estimated range of possible loss from and the impact on Merrill Lynch of various legal proceedings discussed in Note 14 to the Consolidated Financial ~~Reform~~Statements; ~~Act~~our trading risk management processes; Bank of America's intentions to streamline its organizational structure and ~~decisions~~reduce complexity and costs by reducing the number of its subsidiaries, and that Bank of America may, subject to ~~downsize~~applicable regulatory approvals, ~~sell~~consents orand ~~close~~other ~~units~~conditions orof ~~otherwise~~closing, ~~change~~merge ~~the~~ML ~~business~~& ~~mix~~Co. with and into Bank of America Corporation; and other matters relating to Merrill Lynch. The foregoing is not an exclusive list of all forward-looking statements we make. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond our control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

~~Forward~~You should not place undue reliance on any forward-looking ~~statements~~statement ~~speak~~and ~~only~~should consider the following uncertainties and risks, as ofwell as the ~~date~~risks ~~they~~and ~~are~~uncertainties ~~made~~more fully discussed elsewhere in this report, under Item 1A. “Risk Factors” of this report, and in any of ML & Co.'s subsequent Securities and Exchange Commission (“SEC”) filings: Merrill Lynch's ~~undertakes~~ability noto ~~obligation~~resolve its representations and warranties repurchase claims made by monolines and private-label and other investors, including as a result of any adverse court rulings, and the chance that we could face related securities, fraud, indemnity or other claims from one or more of the monolines or private-label and other investors; uncertainties about the financial stability of several countries in the European Union (the "EU"), the risk that those countries may default on their sovereign debt and related stresses on financial markets, the Euro and the EU and Merrill Lynch's exposures to such risks, including direct, indirect and operational; the negative impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Merrill Lynch's businesses and earnings, including as a result of additional regulatory interpretation and rulemaking and the success of

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~~update~~Merrill ~~any~~Lynch's ~~forward-looking~~actions ~~statement~~to mitigate such impacts; adverse changes to ~~reflect~~Merrill Lynch's credit ratings from the ~~impact~~major credit rating agencies; estimates of ~~circumstances~~the fair value of certain of Merrill Lynch's assets and liabilities; unexpected claims, damages and fines resulting from pending or ~~events~~future ~~that~~litigation ~~arise~~and ~~after~~regulatory proceedings; Merrill Lynch's ability to fully realize the ~~date~~cost savings and other anticipated benefits from Project New BAC, including in accordance with currently anticipated timeframes; decisions to downsize, sell or close units or otherwise change the ~~forward-looking~~business ~~statement~~mix ~~was~~of ~~made~~Merrill Lynch; and other similar matters.

Forward-looking statements speak only as of the date they are made, and Merrill Lynch undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

The Notes to the Consolidated Financial Statements referred to in Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") are incorporated by reference into MD&A. Certain prior-period amounts have been reclassified in order to conform with the current year's presentation.

Introduction

Merrill Lynch was founded in 1914 and became a publicly traded company on June 23, 1971. In 1973, the holding company ML & Co. was created. Through our subsidiaries, we are one of the world's leading capital markets, advisory and wealth management companies. We are a leading global ~~trader~~market-maker and underwriter of securities and derivatives across a broad range of asset classes, and we serve as a strategic advisor to corporations, governments, institutions and individuals worldwide. On January 1, 2009, Merrill Lynch was acquired by, and became a wholly-owned subsidiary of, Bank of America Corporation (“Bank of America”).

~~Bank~~Intragroup ~~of America Acquisition and Basis of Presentation~~Reorganization

On ~~January~~ November 1, ~~2009~~2012, ~~Merrill~~in ~~Lynch~~connection ~~was~~with ~~acquired~~an byintragroup ~~Bank~~reorganization ofinvolving ~~America Corporation (“~~Bank of America”) ~~through~~and ~~the~~a ~~merger~~number of aits ~~wholly-owned~~subsidiaries, ~~subsidiary~~Merrill ofLynch ~~Bank~~acquired oftwo ~~America~~affiliated ~~with~~companies and ~~into~~their ~~ML &~~respective ~~Co.~~subsidiaries ~~with~~from ~~ML &~~Bank Coof America. The ~~continuing~~acquisition aswas ~~the~~effected ~~surviving~~through ~~corporation and~~ a ~~wholly~~non-~~owned~~cash ~~subsidiary~~capital ofcontribution from Bank of America. In ~~Upon~~accordance ~~completion~~with ofAccounting ~~the~~Standards ~~acquisition,~~Codification ~~each~~(“ASC”) ~~outstanding~~805, ~~share~~Business ofCombinations, ~~ML &~~Merrill ~~Co.~~Lynch's ~~common~~Consolidated ~~stock~~Financial ~~was~~Statements ~~converted~~appearing ~~into~~in ~~0.8595 shares~~Part ofII, ~~Bank~~Item 8 of ~~America~~this ~~common~~Form ~~stock.~~10-K Asinclude of the ~~completion~~historical results of the ~~acquisition,~~acquired ~~ML &~~affiliated ~~Co.~~companies ~~Series 1~~and ~~through~~their ~~Series 8~~subsidiaries ~~preferred~~as ~~stock~~if ~~were~~the ~~converted~~transaction ~~into~~had ~~Bank~~occurred as of ~~America~~January 1, ~~preferred~~2009, ~~stock~~the ~~with~~date ~~substantially~~at ~~identical~~which ~~terms~~all to the ~~corresponding~~affected ~~series~~entities ofwere ~~Merrill~~first ~~Lynch~~under ~~preferred~~the ~~stock~~common ~~(except~~control ~~for~~of ~~additional voting rights provided to the~~ Bank of America ~~securities)~~. ~~The~~ Merrill Lynch ~~9.00%~~has ~~Mandatory~~recorded ~~Convertible~~the ~~Non-Cumulative~~assets ~~Preferred~~and ~~Stock,~~liabilities ~~Series 2,~~acquired ~~and~~in ~~9.00%~~connection ~~Mandatory~~with ~~Convertible~~the ~~Non-Cumulative~~transaction ~~Preferred~~at ~~Stock,~~their ~~Series 3~~historical ~~that~~carrying ~~remained~~values, ~~issued~~which ~~and~~resulted ~~outstanding~~in ~~subsequent~~increases to ~~the~~stockholder's ~~completion~~equity ofand ~~the~~receivables ~~acquisition~~from ~~were automatically converted into~~ Bank of America ~~common~~of ~~stock~~approximately on$13.5 ~~October 15~~billion, ~~2010~~$9.1 inbillion ~~accordance~~and ~~with~~$9.0 ~~the~~billion ~~terms~~as of ~~these~~December ~~securities~~31, 2012, 2011 and 2010, respectively.

As discussed below, on November 1, 2010, Banc of America Securities Holdings Corporation (“BASH”), a wholly-owned subsidiary of Bank of America, merged into ML & Co., with ML & Co. as the surviving corporation (the “BASH Merger”). In accordance with Accounting Standards Codification (“ASC”) 805-10, Business Combinations, Merrill Lynch's Consolidated Financial Statements appearing in Part II, Item 8 of this Form 10-K include the historical results of BASH and subsidiaries as if the BASH Merger had occurred as of January 1, 2009, the date at which both entities were first under the common control of Bank of America. Merrill Lynch has recorded the assets and liabilities acquired in connection with the BASH Merger at their historical carrying values.

Merger With BASH

As a result of the BASH Merger, Banc of America Securities LLC (“BAS”), a wholly-owned broker-dealer subsidiary of BASH, became a wholly-owned broker-dealer subsidiary of ML & Co. Subsequently, on November 1, 2010, BAS was merged into Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation in the merger (the “MLPF&S Merger”). As a result of the MLPF&S Merger, MLPF&S remained a direct wholly-owned broker-dealer subsidiary of ML & Co. and an indirect wholly-owned broker-dealer subsidiary of Bank of America.

Business Segments

Pursuant to ASC 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The business activities of Merrill Lynch are included within certain of the operating segments of Bank of America. Detailed financial information ~~related~~of the nature that could be used to allocate resources and assess the performance and operations for components of Merrill Lynch, however, is not provided to Merrill Lynch's chief operating decision maker. As a result, Merrill Lynch does not contain any identifiable operating segments under Segment Reporting, and therefore the financial information of Merrill Lynch is presented as a single segment.

Form 10-K Presentation

As a result of the acquisition of Merrill Lynch by Bank of America, certain information is not required in this Form 10-K as permitted by General Instruction I (2) of Form 10-K. We have also abbreviated the MD&A as permitted by General Instruction I (2).

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financial information of Merrill Lynch is presented as a single segment.

Form 10-K Presentation

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EXECUTIVE OVERVIEW

We reported a net ~~loss~~income of $~~1.7~~290 ~~billion~~million for the year ended December 31, ~~2011~~2012 as compared with a net ~~earnings~~loss of $31.86 billion infor the year ended December 31, ~~2010~~2011. Revenues, net of interest expense (“net revenues”) for ~~2011~~2012 were $2420.32 billion compared with $2724.84 billion in ~~2010~~2011. Our pre-tax loss was $42.73 billion in ~~2011~~2012 ~~compared~~and ~~with pre-tax earnings of~~ $34.96 billion in ~~2010~~2011.

~~Our~~The improvement in our after-tax results for the year ended December 31, ~~2011~~2012 was primarily ~~reflected~~driven ~~lower~~by ~~principal transactions revenues associated with our trading activities,~~ lower ~~other revenues, and higher~~ non-interest expenses, ~~including~~and ~~higher~~certain ~~intercompany~~income ~~service~~tax ~~fees~~benefits ~~from~~reflected ~~Bank~~in ofour ~~America~~effective ~~and~~income ~~higher~~tax ~~compensation~~rate, ~~and~~partially ~~benefits~~offset ~~expense.~~by lower net revenues.

~~Our~~The ~~results~~decline ~~for~~in ~~the~~non-interest ~~year~~expenses ~~ended~~was ~~December~~primarily ~~31,~~associated ~~2011~~with ~~were~~our ~~also~~liability ~~adversely~~for ~~affected by a $2.7 billion~~ representations and warranties ~~provision.~~related Onto ~~June 28,~~our ~~2011,~~repurchase ~~Bank~~exposure ofon ~~America and~~ certain ~~of its non~~private-~~Merrill~~label ~~Lynch~~securitizations. In ~~subsidiaries~~the ~~entered~~year ~~into~~ended aDecember ~~settlement~~31, ~~agreement~~2011, ~~(that~~we isrecorded ~~subject~~a to$2.7 ~~final~~billion ~~court~~provision ~~approval~~for representations and ~~certain~~warranties ~~other~~due ~~conditions)~~ to ~~resolve,~~our ~~among~~determination ~~other~~that ~~claims,~~we ~~all~~had ~~outstanding~~sufficient ~~and~~experience ~~potential claims~~ related to ~~alleged~~our ~~representations~~exposure ~~and~~on ~~warranties~~certain ~~breaches~~private-label ~~(including~~securitizations ~~repurchase~~as ~~claims)~~a ~~with~~result ~~respect~~of toBank aof ~~number~~America's ofsettlement ~~non-GSE~~with ~~residential~~the ~~mortgage-backed~~Bank ~~securitization~~of ~~trusts.~~New AsYork aMellon ~~result~~during ofthat period. In the ~~experience~~year ~~gained~~ended byDecember ~~Bank~~31, of2012, ~~America~~we ~~and~~recorded ~~certain~~a ofreduction ~~its~~to non-~~Merrill~~interest ~~Lynch~~expenses ~~affiliates~~of ~~from~~$754 ~~this~~million ~~settlement~~that ~~agreement,~~lowered ~~Merrill~~our ~~Lynch~~liability ~~determined~~for ~~that~~representations itand ~~had~~warranties ~~sufficient~~exposures, ~~experience~~since torecent ~~record~~levels ~~the~~of ~~$2.7 billion~~claims ~~liability~~and ~~for~~file ~~representations~~requests ~~and~~with ~~warranties~~certain ~~related~~counterparties tohave ~~its~~been ~~repurchase~~less ~~exposure~~than onoriginally ~~private-label~~anticipated ~~securitizations~~and, ~~during~~as a result, a portion of the ~~quarter~~loss ~~ended~~was ~~June 30,~~no ~~2011.~~longer deemed probable. See “Off-Balance Sheet Exposures - Representations and Warranties” for further information. The decline in non-interest expenses also included lower compensation and benefits and other expenses.

~~The~~Our ~~declines~~effective inincome ~~net~~tax ~~earnings~~rate ~~and~~was ~~net~~112.8% ~~revenues~~in ~~for~~ the year ended December 31, ~~2011~~2012 ~~were~~compared ~~partially~~with ~~offset by higher managed account and other fee-based revenues~~64. ~~There~~1% ~~was also an increase~~ in ~~revenues associated with~~ the ~~valuation of certain of our long-term debt liabilities as compared with the~~ prior year. The ~~During~~effective ~~the~~income ~~year~~tax ~~ended~~rate ~~December~~in ~~31,~~2012 ~~2011,~~was weprimarily ~~recorded~~driven ~~net~~by ~~gains~~certain ofincome $2tax benefits.~~0 billion~~ See ~~due~~"Results ~~to the impact~~ of ~~the~~Operations ~~widening of Merrill Lynch's credit spreads on the carrying value of certain of our long~~-~~term~~ ~~debt~~Year ~~liabilities,~~Ended ~~primarily~~December ~~structured notes~~31, ~~while~~2012 inCompared ~~the~~With ~~year~~Year ~~ended~~Ended December 31, ~~2010,~~2011" wefor ~~recorded~~further ~~net losses of $0~~information.~~1 billion due to the narrowing of our credit spreads.~~

~~Our~~The ~~net~~decline ~~loss~~in ~~applicable to~~ our ~~common~~net ~~shareholder~~revenues ~~was $1.7 billion~~ for the year ended December 31, ~~2011~~2012 ~~compared~~was ~~with~~primarily ~~net~~attributable ~~earnings~~to lower principal transactions revenues due to the valuation of ~~$3.6~~certain ~~billion~~of inour liabilities as compared with the prior year. OnDuring ~~October 15~~the year ended December 31, ~~2010~~2012, ~~all~~we ofrecorded ~~ML &~~net ~~Co.'s~~losses ~~outstanding~~of ~~Series~~ $3.2 ~~and Series~~ 3billion ~~Mandatory~~due ~~Convertible~~to ~~Non-Cumulative~~the ~~Preferred~~impact ~~Stock~~of ~~automatically~~the ~~converted~~narrowing ~~into Bank~~ of ~~America~~our ~~common~~credit ~~stock~~spreads inon ~~accordance with~~ the ~~terms~~carrying value of ~~those~~certain ~~securities.~~of ~~Immediately~~our ~~upon~~long-term ~~conversion~~debt liabilities, ~~dividends~~primarily onstructured ~~such~~notes, ~~shares~~while ofin ~~preferred~~the ~~stock~~year ~~ceased~~ended toDecember ~~accrue~~31, ~~the~~2011, ~~rights~~we ofrecorded ~~holders~~net gains of ~~such~~$2.0 ~~preferred~~billion ~~stock~~due ~~ceased,~~to ~~and~~ the ~~persons~~widening ~~entitled~~of toour ~~receive~~credit ~~the~~spreads. We ~~shares~~also ofrecorded ~~Bank~~losses of ~~America~~$1.1 ~~common~~billion ~~stock~~in ~~were~~the ~~treated~~year ~~for~~ended ~~all~~December ~~purposes~~31, as2012 ~~having~~due ~~become~~to the ~~record~~impact ~~and~~of ~~beneficial~~net ~~owners~~valuation ofadjustments ~~shares~~associated ofwith ~~Bank~~the narrowing of ~~America~~our ~~common~~credit ~~stock. As~~spreads aon ~~result~~the fair value of ~~the~~certain ~~conversion~~derivative liabilities (i.e., ~~there~~the ~~were~~debit novaluation ~~preferred~~adjustment ~~stock~~or ~~dividends~~"DVA") ~~recorded~~as ~~during~~compared ~~the~~with ~~year~~gains ~~ended~~from ~~December~~DVA ~~31,~~due ~~2011.~~to ~~Preferred~~the ~~stock~~widening ~~dividends~~of our credit spreads of $~~134~~ 493 million ~~were recorded~~ in the prior year. These ~~ended~~decreases ~~December~~in ~~31,~~principal ~~2010.~~transactions ~~See~~revenues ~~Note 13~~were topartially ~~the~~offset ~~Consolidated~~by ~~Financial~~improved ~~Statements~~results ~~for~~from ~~further~~our ~~information~~fixed income trading activities.

Transactions with Bank of America

We have entered into various transactions with Bank of America, including transactions in connection with certain sales and trading and financing activities, as well as the allocation of certain shared services. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, ~~2011~~2012 were $1.36 billion and $2.52 billion, respectively. Such net revenues and non-interest expenses for the year ended December 31, ~~2010~~2011 were $~~906~~1.5 ~~million~~billion and $~~807~~2.5 ~~million~~billion, respectively. Net revenues and non-interest expenses for ~~the~~both ~~year~~periods ~~ended~~included ~~December 31, 2011 reflect increased~~ intercompany service fee revenues and expenses from Bank of America ~~resulting~~associated ~~from~~with ~~the~~allocations ~~integration~~ of ~~Bank~~certain ofcentralized ~~America's~~or ~~and~~shared ~~Merrill~~business ~~Lynch's~~activities ~~methodologies~~between ~~for~~Merrill ~~allocating~~Lynch ~~revenues~~ and ~~expenses associated with shared services to their subsidiaries. The net revenues related to transactions with~~ Bank of America. See ~~for~~Note 2 ~~the~~to ~~year ended December 31, 2010 included a gain of $280 million from~~ the ~~sale~~Consolidated ofFinancial ~~approximately~~Statements ~~$11 billion of available-~~for~~-sale~~ ~~securities~~further ~~to Bank of America~~information. ~~These transfers were made to enable Bank of America or~~

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~~its~~On ~~non-Merrill~~January ~~Lynch~~6, ~~subsidiaries~~2013, toBank ~~more~~of ~~efficiently~~America ~~manage~~entered ~~the~~into ~~existing~~an ~~portfolio~~agreement ofwith ~~similar~~Fannie ~~available-for-sale~~Mae ~~securities.~~("FNMA") Into ~~addition,~~resolve assubstantially ~~discussed~~all ~~below,~~outstanding ~~net~~and ~~revenues~~potential ~~for~~repurchase ~~the~~and ~~year~~certain ~~ended~~other ~~December~~claims ~~31,~~relating ~~2010~~to ~~included~~the aorigination, ~~gain~~sale and delivery of ~~approximately~~certain ~~$600 million~~residential ~~from~~mortgage loans. As part of the ~~sale~~agreement, Bank of ~~Bloomberg~~America ~~Inc~~repurchased for $6.6 ~~notes~~billion certain residential mortgage loans that had previously been sold to FNMA, which Bank of America. ~~See~~valued ~~Note 2~~at toless than the ~~Consolidated~~purchase ~~Financial~~price. The ~~Statements~~majority ~~for~~of ~~further~~such ~~information~~loans are held by Merrill Lynch.

Merger with BASH

See “Introduction - Merger With BASH” for further information on this transaction.

Sale of Bloomberg Inc. Notes

In July 2008, Merrill Lynch sold its 20% ownership stake in Bloomberg, L.P. to Bloomberg Inc. A portion of the consideration we received 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 a subsidiary of Bank of America at fair value. As a result of the sale, we recorded a gain of approximately $600 million, which is included within Other revenues in the Consolidated Statement of (Loss) Earnings for the year ended December 31, 2010.

Other Events

~~Credit~~Sale ~~Ratings~~of International Wealth Management Businesses and Brokerage Joint Venture Investment

OnIn ~~December 15~~2012, ~~2011,~~we ~~Fitch~~entered ~~Ratings~~into ~~("Fitch")~~agreements ~~downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of Fitch's decision~~ to ~~lower~~sell ~~its~~our ~~"support~~International ~~floor"~~Wealth ~~for~~Management ~~systemically important U.S. financial institutions. On November 29, 2011, Standard & Poor's Ratings Services~~ ("~~S&P~~IWM") ~~downgraded~~businesses ~~Bank~~based outside of ~~America's~~the ~~and ML & Co~~U.~~'s long-term and short-term debt ratings as a result of~~ S~~&P's implementation of revised methodologies for determining Banking Industry Country Risk Assessments and bank ratings~~. ~~On September 21~~, ~~2011,~~subject ~~Moody's~~to ~~Investors~~regulatory ~~Service,~~approval ~~Inc.~~in ~~("Moody's")~~multiple ~~downgraded~~jurisdictions, ~~Bank of America's~~ and MLthe &first ~~Co.'s~~of ~~long-term and short-term debt ratings as~~ a ~~result~~series of ~~Moody's~~closings ~~lowering~~occurred ~~the~~in ~~amount~~February ~~of uplift for potential U~~2013.~~S. government support it incorporates into ratings.~~ OnAlso, ~~February~~in ~~15,~~late 2012, ~~Moody's~~Merrill ~~placed~~Lynch ~~Bank~~sold ofits ~~America's~~investment ~~long-term~~in ~~debt~~a ~~ratings~~Japanese onbrokerage ~~review~~joint ~~for~~venture, ~~possible~~which ~~downgrade~~resulted asin ~~part~~a ofgain ~~their review~~ of ~~financial~~approximately ~~institutions~~$370 ~~with global capital markets operations~~million. ~~Any~~The ~~adjustment~~IWM tobusinesses ~~Bank of America's (~~and ~~consequently, our) ratings will be determined based on Moody's review; however,~~ the ~~agency~~Japanese ~~offered~~brokerage ~~guidance~~joint ~~that~~venture ~~downgrades~~had tocombined ~~Bank~~client balances of ~~America's~~approximately ~~ratings,~~$115 ~~if any, would likely be limited to one notch~~billion.

Currently, Bank of America's and ML & Co.'s long-term/short-term senior debt ratings and outlooks expressed by the rating agencies are as follows: Baa1/P-2 (negative) by Moody's; A-/A-2 (negative) by S&P; and A/F1 (stable) by Fitch. The rating agencies could make further adjustments to Bank of America's (and consequently, our) credit ratings at any time and there can be no assurance that additional downgrades will not occur.

Under the terms of certain OTC derivative contracts and other trading agreements, in the event of a downgrade of our credit ratings or certain subsidiaries' credit ratings, counterparties to those agreements may require us or certain subsidiaries to provide additional collateral, terminate these contracts or agreements, or provide other remedies.

For information regarding the risks associated with adverse changes in our credit ratings, see “Executive Overview - Other Events - Transactions with Affiliates”, “Funding and Liquidity - Credit Ratings”, Note 6 to the Consolidated Financial Statements, and Item 1A. "Risk Factors" of this Annual Report on Form 10-K.

Retirement of Certain Debt Instruments

As credit spreads for many financial institutions, including Merrill Lynch, have widened during the past year due to uncertainty and volatility in the global financial markets, the fair value of debt previously issued by financial institutions has decreased. This uncertainty in the market, evidenced by, among other things, volatility in credit spreads, makes it

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economically advantageous to consider purchasing and retiring certain of our outstanding debt instruments. In 2012, we completed a tender offer to purchase and retire certain subordinated notes for approximately $1.2 billion in cash and will consider additional purchases in the future depending upon prevailing market conditions, liquidity and other factors. If the purchase of any debt instruments are at an amount less than the carrying value, such purchases would be accretive to earnings.

European Union Sovereign Credit Risks

Certain European countries, including Greece, Ireland, Italy, Portugal and Spain, continue to experience varying degrees of financial stress. Uncertainty in the progress of debt restructuring negotiations and the lack of a clear resolution to the crisis has led to continued volatility in European as well as global financial markets, and if the situation worsens, may further adversely affect these markets. In December 2011, the European Central Bank (the "ECB") announced initiatives to address European bank liquidity and funding concerns by providing low-cost, three-year loans to banks, and expanding collateral eligibility. While reducing systemic risk, there remains considerable uncertainty as to future developments regarding the European debt crisis. In early 2012, S&P, Fitch and Moody's downgraded the credit ratings of several European countries, and S&P downgraded the credit rating of the European Financial Stability Facility (the “EFSF”), adding to concerns about investor appetite for continued support in stabilizing the affected countries. Our total sovereign and non-sovereign exposure to Greece, Italy, Ireland, Portugal and Spain was $2.7 billion at December 31, 2011. Our total net sovereign and non-sovereign exposure to these countries was $1.1 billion at December 31, 2011, after taking into account net credit default protection. At December 31, 2011, the fair value of net credit default protection purchased was $1.6 billion. Losses could still result because our credit protection contracts pay out only under certain scenarios. For further discussion of our direct sovereign and non-sovereign exposures in Europe, see Item 7A.“Quantitative and Qualitative Disclosures About Market Risk - Credit Risk Management” and for more information about the risks associated with our non-sovereign exposures in Europe, see Item 1A. "Risk Factors".

Project New BAC

Project New BAC is a two-phase, enterprise-wide initiative to simplify and streamline workflows and processes, align businesses and expenses more closely with Bank of America's overall strategic plan and operating principles, and increase revenues. Phase 1 evaluations, which were completed in September 2011, focused on Bank of America's consumer businesses and related support, technology and operations functions. Phase 2 evaluations began in October 2011 and are focused on businesses and related support, technology and operations functions not subject to evaluation in Phase 1. Phase 2 evaluations are expected to continue through April 2012.

Implementation of Phase 1 recommendations began in late 2011. Reductions in the areas subject to evaluation for Phase 2 have not yet been fully identified, and accordingly, potential cost savings are currently uncertain; however, they are expected to be lower than Phase 1. All aspects of New BAC are expected to be implemented by the end of 2014.

When reductions in employment levels associated with the implementation of New BAC are probable of occurring and the amounts can be reasonably estimated, the associated severance costs will be recognized. There were no material expenses related to New BAC recorded in the year ended December 31, 2011.

For further information about the risks associated with New BAC, see Item 1A. "Risk Factors".

U.K. Corporate Income Tax Rate Change

On July 19, 2011, the U.K. 2011 Finance Bill was enacted, which reduced the corporate income tax rate. As a result of the reduction, we recorded a charge of $774 million due to the remeasurement of our U.K. net deferred tax assets. For additional information, see “Results of Operations - Year Ended December 31, 2011 Compared With Year Ended December 31, 2010.”

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U.K. Bank Levy

The U.K. government bank levy legislation was enacted on July 19, 2011. The rate on banks operating in the U.K. has been set at 7.5 basis points (“bps”) for short-term liabilities and 3.75 bps for long-term liabilities for 2011 and will increase to 8.8 bps for short-term liabilities and 4.4 bps for long-term liabilities beginning in 2012. The cost of the bank levy was approximately $53 million for 2011, which is non-deductible for U.K. tax purposes.

Financial Reform Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Financial Reform Act"), which was signed into law on July 21, 2010, ~~enacts~~enacted sweeping financial regulatory reform and has altered and will continue to alter the way in which we conduct certain businesses, increase our costs and reduce our revenues. Many aspects of the Financial Reform Act remain subject to final rulemaking and will take effect over several years, making it difficult to anticipate the precise impact on Merrill Lynch, our customers or the financial services industry.

Limitations on Proprietary Trading; Sponsorship and Investment in Hedge Funds and Private Equity Funds

On October 11, 2011, the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Office of the Comptroller of the Currency (the “"OCC”"), the Federal Deposit Insurance Corporation (the “"FDIC”") and the Securities and Exchange Commission (the "SEC"), representing four of the five regulatory agencies charged with promulgating regulations implementing limitations on proprietary trading as well as the sponsorship of or investment in hedge funds and private equity funds (the “"Volcker Rule”") established by the Financial Reform Act, released for comment proposed implementing regulations. On January 11, 2012, the Commodity Futures Trading Commission (the “"CFTC”"), the fifth agency, released for comment its proposed regulations under the Volcker Rule. The proposed regulations include clarifications to the definition of proprietary trading and distinctions between permitted and prohibited activities. ~~The~~ ~~comment period for the first regulations proposed ended on February 13, 2012 and the comment period for the CFTC regulations will end in March 2012.~~ However, in light of the complexity of the proposed regulations and the large volume of comments received (the proposal requested comments on over 1,300 questions on 400 different topics), it is not possible to predict the content of the final regulations or when they will be issued.

The statutory provisions of the Volcker Rule ~~will~~became ~~become~~ effective on July 21, 2012, ~~whether or not the final regulations are adopted,~~ and itgave ~~gives certain~~ financial institutions two years from the effective date, with ~~opportunities~~the possibility for ~~additional~~ extensions for certain investments, to bring activities and investments into compliance with the statutory provisions and final regulations. Although we exited our stand-alone proprietary trading business as of June 30, 2011 in anticipation of the Volcker Rule and ~~further~~ to further our initiative to optimize our balance sheet, the ultimate impact of the Volcker Rule on us remains uncertain. as the regulations implementing the Volcker Rule are not final. However, based ~~upon~~on the ~~content~~contents of the proposed regulations, it is possible ~~that~~ the ~~implementation of the~~ Volcker Rule implementation could limit or restrict our remaining trading activities. ~~Implementation~~If ofexemptions in the Volcker Rule and the proposed regulations are not available, the Volcker Rule could also limit or restrict our ability to sponsor and hold ownership interests in hedge funds, private equity funds, commodity pools and other subsidiary operations. Additionally, the Volcker Rule could increase our operational and compliance costs, reduce our trading revenues and adversely affect our results of operations. ~~For additional information about our trading business, see “Results of Operations - Year Ended December 31, 2011 Compared With Year Ended December 31, 2010.”~~

Derivatives

The Financial Reform Act includes measures to broaden the scope of derivative instruments subject to regulation by requiring clearing and exchange trading of certain derivatives; imposing new capital, margin, reporting, registration and business conduct requirements for certain market participants; and imposing position limits on certain OTC derivatives. The Financial Reform Act required regulators to promulgate the rulemakings necessary to implement these regulations by July 16, 2011. However, the rulemaking process was not completed as of this date, and is not expected to conclude until well into 2012. Further, the regulators granted temporary relief from certain requirements that would have taken effect on July 16, 2011 absent any rulemaking. The SEC temporary relief is effective until final rules relevant to each requirement become effective. The CFTC temporary relief is effective until the earlier of July 16, 2012 or the date on which final rules relevant to each requirement become effective. The ultimate impact of these derivatives regulations, and the time it will take to comply, continues to remain uncertain. The final

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~~regulations~~and ~~will~~business ~~impose~~conduct ~~additional~~requirements ~~operational~~for certain market participants; and ~~compliance~~imposing ~~costs~~position limits on uscertain over-the-counter ("OTC") derivatives. The Financial Reform Act grants the CFTC and ~~may~~the ~~require~~SEC ussubstantial new authority and requires numerous rulemakings by these agencies. Swap dealers conducting dealing activity with U.S. persons above a specified threshold were required to ~~restructure~~register with the CFTC on or before December 31, 2012. We registered Merrill Lynch Commodities Inc., Merrill Lynch Capital Services, Inc., Merrill Lynch Financial Markets, Inc., Merrill Lynch International and Merrill Lynch International Bank Limited as swap dealers on December 31, 2012. Upon registration, swap dealers became subject to additional CFTC rules relating to business conduct and reporting, and will continue to become subject to additional CFTC rules as and when such rules take effect. Those rules include, but are not limited to, measures that require clearing and exchange trading of certain ~~businesses~~derivatives, ~~thereby~~new ~~negatively~~capital ~~impacting~~and ~~our~~margin ~~revenues~~requirements for certain market participants, and ~~results~~additional reporting requirements for derivatives under the jurisdiction of ~~operations~~the CFTC. The CFTC also granted relief from some of the rules that would have become effective during the fourth quarter of 2012, either completely suspending or delaying the application of some requirements.

~~The~~While the CFTC has provided temporary exemptive relief from application of derivatives requirements of the Financial Reform Act for certain non-U.S. derivatives activity, there remains some uncertainty as to how the derivatives requirements of the Financial Reform Act will ~~continue~~apply to ~~have~~non-U.S. aderivatives ~~significant~~activity ~~and~~because ~~negative~~the ~~impact~~CFTC onhas ~~our~~not ~~earnings~~yet ~~through~~adopted ~~revenue~~final ~~reductions~~cross-border guidance. The CFTC has completed much of its other rulemakings, ~~higher~~with ~~costs~~the exception of final margin, capital and ~~new~~exchange ~~restrictions~~trading rules, aswhile ~~well~~the asSEC ~~reductions~~has tofinalized ~~available~~a ~~capital~~small number of clearing-related rules. The ultimate impact of the ~~Financial~~derivatives ~~Reform~~regulations ~~Act~~that onhave ~~our~~not ~~businesses~~been finalized, and ~~results~~the oftime ~~operations~~it will ~~depend~~take onto ~~regulatory~~comply, ~~interpretation~~remain ~~and~~uncertain. ~~rulemaking,~~The asfinal ~~well~~regulations aswill ~~the~~impose ~~success~~additional ofoperational ~~any~~and ofcompliance ~~our~~costs ~~actions~~on us and may require us to ~~mitigate~~restructure ~~the~~certain ~~negative~~businesses ~~earnings~~and may negatively impact ofour ~~certain~~results ~~provisions~~of operations.

Transactions with Affiliates

The terms of certain of our OTC derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change in our credit ratings, we may be required to provide additional collateral or to provide other remedies, or our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements. ~~Following~~In the ~~recent~~event ~~downgrade~~ of ~~our~~further ~~and~~downgrades ~~other~~of ~~non-bank~~our ~~affiliates'~~ credit ratings, we ~~have~~may ~~engaged~~engage in discussions with certain derivative and other counterparties regarding their rights under these agreements~~. In response to counterparties' inquiries and requests~~, we have discussed and in some cases substituted derivative contracts and other trading agreements, including naming our affiliate, Bank of America, N.A. ("BANA") as the new counterparty. Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming BANA as the new counterparty, and the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, including naming BANA as the new counterparty, could adversely affect our results of operations.

including potentially naming new counterparties. Our ability to substitute or make changes to these agreements to meet counterparties’ requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming our affiliate, Bank of America, N.A. ("BANA"), as the new counterparty, and the type or amount of collateral required. It is possible that such limitations on our ability to substitute or make changes to these agreements, including naming BANA as the new counterparty, could adversely affect our results of operations.

Other Matters

Bank of America and Merrill Lynch have established guidelines and policies for managing capital across their respective subsidiaries. The guidance for our subsidiaries with regulatory capital requirements, including branch operations of banking subsidiaries, requires each entity to maintain satisfactory capital levels. InThe ~~the~~ U.K., ~~the Financial Services Authority (the “FSA”)~~ has ~~issued~~adopted ~~proposed~~increased ~~rules~~capital ~~requiring~~and ~~the~~liquidity ~~submission~~requirements offor ~~significant~~local ~~information~~financial ~~about~~institutions, ~~certain~~including regulated U.K. ~~incorporated~~ subsidiaries ~~(including~~of ~~information~~non-U.K. onbank ~~intra-group~~holding ~~dependencies~~companies and ~~legal~~other ~~entity~~financial ~~separation)~~institutions toas ~~allow~~well ~~the~~as ~~FSA~~branches toof ~~develop resolution plans~~non-U. AsK. abanks ~~result~~located ofin the ~~FSA~~U.K. ~~review~~In addition, wethe ~~could~~U.K. behas ~~required~~proposed tothe ~~take~~creation ~~certain~~and ~~actions~~production ~~over~~of ~~the~~recovery ~~next~~and ~~several~~resolution ~~years~~plans, ~~which~~commonly ~~could~~referred ~~impose~~to ~~operational~~as ~~costs~~living ~~and~~wills, ~~potentially~~by ~~could~~significant ~~result~~regulated inlegal ~~the restructuring of certain businesses and subsidiaries~~entities.

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RESULTS OF OPERATIONS
(dollars in millions, except per share amounts)
(dollars in millions)
	For the Year EndedDecember 31, 2011			For the Year EndedDecember 31, 2010			% Change between theYear EndedDecember 31, 2011 and the YearEnded December 31, 2010
	For the Year EndedDecember 31, 2012			For the Year EndedDecember 31, 2011			% Change between theYear EndedDecember 31, 2012 and the YearEnded December 31, 2011
Revenues
Principal transactions	$	52,~~928~~306		$	75,~~074~~876		(1661)%	)%
Commissions	5,~~698~~079			5,~~760~~698			(111)	)
Managed account and other fee-based revenues	5,~~203~~427			45,~~516~~203			154
Investment banking	54,~~179~~914			5,~~313~~179			(35)	)
Earnings from equity method investments	~~347~~285			~~898~~347			(6118)	)
Intercompany service fee revenue from BAC	925			279			N/M
Intercompany service fee revenue from Bank of America	986			944			4
Other revenues(1)	1,~~796~~923			41,~~324~~749			~~(58~~10	)
Subtotal	2520,~~076~~920			2824,~~164~~996			(1116)	)
Interest and dividend revenues	86,~~003~~395			98,~~303~~186			(1422)	)
Less interest expense	87,~~785~~098			98,~~621~~785			(919)	)
Net interest expense	(~~782~~703		)	(~~318~~599		)	~~N/M~~17
Revenues, net of interest expense	2420,~~294~~217			2724,~~846~~397			(1317)	)
Non-interest expenses:
Non-interest expenses
Compensation and benefits	1514,~~773~~608			15,~~069~~773			5(7)
Communications and technology	1,~~771~~588			1,~~993~~771			(1110)	)
Occupancy and related depreciation	1,~~367~~204			1,~~395~~367			(212)	)
Brokerage, clearing, and exchange fees	~~1,121~~951			1,~~022~~121			10(15)
Advertising and market development	~~500~~501			~~444~~500			13—
Professional fees	~~1,029~~921			~~986~~1,029			4(10)
Office supplies and postage	~~126~~104			~~157~~126			(2017)	)
Provision for representations and warranties	2,731			(120		)	N/M
Representations and warranties	(754		)	2,731			N/M
Intercompany service fee expense from BAC	2,320			538			N/M
Intercompany service fee expense from Bank of America	1,798			2,320			(23)
Other	21,~~250~~554			2,~~439~~250			(831)	)
Total non-interest expenses	2822,~~988~~475			2328,~~923~~988			21(22)
Pre-tax (loss) earnings	(4,694		)	3,923			N/M
Pre-tax loss	(2,258		)	(4,591		)	(51)
Income tax (benefit) expense	(2,946		)	147			N/M
Income tax benefit	(2,548		)	(2,944		)	(13)
Net (loss) earnings	$	(1,748	)	$	3,776		N/M
Net earnings (loss)	$	290		$	(1,647	)	N/M
Preferred stock dividends	—			134			N/M
Net (loss) earnings applicable to common stockholder	$	(1,748	)	$	3,642		N/M

(1) Amounts include other income and other-than-temporary impairment losses on available-for-sale debt securities. The other-than-temporary impairment losses were $596 million and $~~172~~59 million for the years ended December 31, ~~2011~~2012 and December 31, ~~2010~~2011, respectively.

N/M = Not meaningful.

Consolidated Results of Operations

Our net ~~loss~~earnings for the year ended December 31, ~~2011~~2012 ~~was~~were $~~1.7~~290 ~~billion~~million compared with a net ~~earnings~~loss of $31.86 billion for the year ended December 31, ~~2010~~2011. Net revenues for ~~2011~~2012 were $2420.32 billion compared with $2724.84 billion in ~~2010~~2011.

Year Ended December 31, ~~2011~~2012 Compared With Year Ended December 31, ~~2010~~2011

Principal transactions revenues include both realized and unrealized gains and losses on trading assets and trading liabilities and investment securities classified as trading. Principal transactions revenues were $52.93 billion for the year ended December 31, ~~2011~~2012 compared with $75.19 billion for the year ended December 31, ~~2010~~2011. The ~~decrease~~decline was primarily ~~reflected~~due ~~lower~~to ~~trading~~a ~~revenues~~decrease ~~across~~in ~~most~~revenue ofassociated ~~our~~with ~~businesses~~the asvaluation ~~compared~~of ~~with~~certain ~~the~~of ~~prior~~our liabilities. During the year, ~~primarily~~ended inDecember ~~our~~31, ~~mortgage~~2012, ~~credit~~we ~~and~~recorded ~~rates~~net ~~and~~losses ~~currencies~~of ~~businesses,~~$3.2 billion asdue ~~well~~to asthe aimpact ~~decline~~of inthe ~~proprietary~~narrowing ~~trading~~of ~~revenues~~Merrill ~~due~~Lynch's tocredit spreads on the ~~exit~~carrying value of certain of our ~~stand~~long-~~alone~~term ~~proprietary~~debt ~~trading~~liabilities, ~~business.~~primarily ~~Market~~structured ~~conditions~~notes, ~~were~~while ~~generally~~in ~~difficult~~the ~~throughout~~year ~~2011~~ended asDecember a31, ~~result~~2011, ofwe ~~concerns~~recorded ~~over~~net ~~global~~gains ~~and~~of U$2.S0 ~~economic~~billion ~~conditions,~~due ~~regulatory~~to ~~uncertainty and~~ the ~~implications~~widening of ~~the~~our ~~European~~credit ~~sovereign~~spreads. We ~~debt~~also ~~crisis~~recorded losses from DVA of $1. ~~Such~~1 ~~conditions~~billion ~~contributed~~in tothe ~~heightened~~year ~~market~~ended ~~volatility~~December ~~and~~31, ~~increased~~2012 as compared with

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~~risk~~gains ~~aversion~~from ~~among~~DVA ~~investors. Revenues~~of ~~from~~$493 ~~mortgage~~million ~~products~~in ~~declined~~the asprior ayear. In ~~result~~addition, ofas ~~losses~~discussed ~~due~~below, toprincipal ~~the~~transactions ~~difficult~~revenues ~~market~~in ~~conditions~~2011 ~~that~~included ~~existed~~$418 ~~during~~million ~~the~~of ~~year~~net ~~ended~~revenues ~~December~~associated ~~31,~~with ~~2011,~~our asstand-alone ~~well~~proprietary astrading ~~from~~business, ~~credit~~which ~~valuation~~we ~~adjustments~~exited ~~related~~in toJune ~~financial guarantors~~2011. These ~~Revenues~~decreases ~~from~~in ~~credit~~principal ~~products~~transactions ~~decreased~~revenues ~~and~~were ~~reflected~~partially ~~the~~offset ~~more~~by ~~difficult~~improved ~~trading~~results ~~environment~~from inour ~~2011,~~fixed ~~including~~income ~~widening~~trading ~~credit spreads~~activities, ~~significant~~primarily ~~levels of volatility~~ in ~~the~~our mortgage, credit ~~markets~~ and ~~decreased~~rates ~~liquidity~~ and ~~client~~currencies ~~activity~~businesses. Conditions asin ~~a result of~~ the ~~European~~fixed ~~sovereign~~income ~~debt~~markets ~~crisis.~~were ~~Revenues~~generally ~~from~~more ~~rates~~favorable ~~and~~in ~~currency~~2012 ~~products~~due ~~declined~~to ~~and~~an ~~were~~improved ~~also~~global ~~impacted~~economic byclimate. During ~~the~~2011, ~~difficult~~ market conditions ~~that~~were ~~existed~~generally ~~during~~difficult ~~the~~as ~~year,~~a ~~including~~result ~~the~~of ~~European~~concerns ~~sovereign~~over ~~debt~~global ~~crisis~~ and ~~continued concerns about the economic recovery in the~~ U.S. ~~and~~economic ~~globally. In addition~~conditions, asregulatory ~~discussed~~uncertainty ~~below,~~and ~~principal~~the ~~transaction~~implications ~~revenues~~of ~~from~~the ~~proprietary~~European ~~trading~~sovereign ~~declined~~debt bycrisis, ~~$0.8~~which ~~billion~~contributed ~~due~~ to ~~the~~heightened ~~exit~~market ofvolatility ~~our~~and ~~stand-alone~~increased ~~proprietary~~risk ~~trading~~aversion ~~business~~among ~~as of June 30, 2011~~investors. ~~These declines~~ inRevenues ~~principal~~from ~~transactions~~our ~~revenues~~mortgage ~~were~~products ~~partially~~business ~~offset~~improved, byas ~~an increase in revenue associated with~~ the ~~valuation~~results offrom ~~certain of our liabilities. In~~ the year ended December 31, 2011, wereflected ~~recorded net gains of $2.0 billion due to~~ the ~~impact~~more ofdifficult ~~the~~market ~~widening~~conditions ofand ~~Merrill~~included ~~Lynch's~~losses from credit ~~spreads~~valuation onadjustments ~~the~~related ~~carrying~~to ~~value~~financial ofguarantors. Revenues ~~certain~~from ofcredit ~~our~~products ~~long-term~~increased ~~debt liabilities, primarily structured notes,~~ as ~~compared~~lower ~~with~~market ~~net~~volatility ~~losses~~drove ofcredit $0spreads tighter.~~1 billion~~ Investor ~~from~~demand ~~such~~for ~~long-term~~investment ~~debt~~grade ~~liabilities~~and ~~recorded~~high inyield ~~the~~corporate ~~year~~instruments ~~ended~~also ~~December~~increased ~~31,~~as ~~2010~~a ~~due~~result toof the ~~narrowing~~lower ofvolatility ~~our~~and ~~credit~~relative ~~spreads.~~outperformance Incompared ~~addition,~~with ~~we recorded revenues of $0~~2011.5 Revenues ~~billion~~from inrates ~~the~~and ~~year~~currency ~~ended~~products ~~December~~also 31increased, ~~2011~~resulting ~~due~~from ~~to valuation adjustments associated with~~ the ~~consideration~~improvement ~~of our own creditworthiness~~ in ~~the~~market ~~fair~~conditions ~~value~~as ofcompared ~~certain~~with ~~derivative liabilities, an increase of $0.4 billion from~~ the prior year as ~~our~~well ~~credit~~as ~~spreads~~improved ~~widened during 2011~~positioning.

Included in principal transactions revenues ~~are~~for the year ended December 31, 2011 were net revenues associated with activities we ~~have~~ identified as “proprietary trading,” which was conducted separately from our customer trading activities. Our stand-alone proprietary trading operations engaged in trading activities in a variety of products, including stocks, bonds, currencies and commodities. In ~~response~~connection towith ~~developments~~regulatory ~~relating~~reform measures and our initiative to ~~the~~optimize ~~Volcker~~our ~~Rule~~balance sheet, we ~~have~~ exited our stand- alone proprietary trading business as of June 30, 2011. The revenues from these operations for the year ended December 31, 2011 were $442 million, of which $418 million were included within principal transactions revenues. The ~~revenues from these operations for the year ended December 31, 2010 were $1.4 billion, of which $1.2 billion were included within principal transactions revenues. The~~ remainder of the revenues for these operations were primarily recorded within net interest revenues. See also “Executive Overview - Other Events - ~~Financial Reform Act -~~ Limitations on Proprietary Trading; Sponsorship and Investment in Hedge Funds and Private Equity Funds.”"

Net interest ~~income (~~expense) is a function of (i) the level and mix of total assets and liabilities, including trading assets, deposits, financing and lending transactions, and trading strategies associated with our businesses, and (ii) the prevailing level, term structure and volatility of interest rates. Net interest ~~income (~~expense) is an integral component of trading activity. In assessing the profitability of our client facilitation and trading activities, we view principal transactions and net interest ~~income (~~expense) in the aggregate as net trading revenues. Changes in the composition of trading inventories and hedge positions can cause the mix of principal transactions revenue and net interest ~~income (~~expense) to fluctuate from period to period. Net interest expense was $~~782~~703 million for the year ended December 31, ~~2011~~2012 as compared with net interest expense of $~~318~~599 million in the year ended December 31, ~~2010~~2011. The increase in net interest expense was primarily due to lower net interest revenues generated from our fixed income trading activities, partially offset by lower financing costs.

Commissions revenues primarily arise from agency transactions in listed and OTC equity securities and commodities and options. Commissions revenues also include distribution fees for promoting and distributing mutual funds. Commissions revenues were $5.71 billion for the year ended December 31, ~~2011~~2012, a decrease of 111% from the prior year. The decline ~~reflected~~was ~~marginally~~primarily attributable to our global equity products trading business, and included the impact of lower ~~revenues~~trading ~~from~~volumes ~~both~~globally, ~~our~~as ~~global~~average ~~markets~~trading volumes as measured by the major market indices in the U.S., Europe and Pacific Rim regions declined by approximately 27%, 9% and 5%, respectively. Commissions revenues from our global wealth management businesses also declined as a result of lower transaction volumes as compared with the prior year.

Managed account and other fee-based revenues primarily consist of asset-priced portfolio service fees earned from the administration of separately managed and other investment accounts for retail investors, annual account fees, and certain other account-related fees. Managed account and other fee-based revenues were $5.24 billion for the year ended December 31, ~~2011~~2012, an increase of 154% from the prior year ~~period~~. The increase was driven by higher fee-based revenues from our global wealth management activities, reflecting higher levels of fee-based assets from which such revenues are generated as well as increased revenues from fees on new accounts and asset management fees. The increase in fee-based assets was due to both strong client flows into long-term products and market appreciation.

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Investment banking revenues include (i) origination revenues representing fees earned from the underwriting of debt, equity and equity-linked securities, as well as loan syndication and commitment fees and (ii) advisory services revenues including merger and acquisition and other investment banking advisory fees. Total investment banking revenues were $54.29 billion for the year ended December 31, ~~2011~~2012, a decrease of 35% from the prior year. Underwriting revenues decreased 82% to $43.09 billion, ~~largely~~as ~~driven~~lower revenues from equity issuances were partially offset by ~~lower~~an ~~fees~~increase in revenues from debt ~~capital~~issuances. Revenues ~~markets~~from advisory services decreased 15% to $1.0 billion, ~~particularly~~reflecting inreduced ~~leveraged~~global ~~finance~~merger and acquisition transaction fee pools. ~~Revenues~~Investment banking revenues from ~~equity~~transactions ~~issuances~~involving ~~also~~Bank ~~declined~~of ~~due~~America towere ~~difficult~~$125 ~~market~~million ~~conditions.~~in the year ended December 31, 2012 and $322 million in the year ended December 31, 2011.

~~Revenues~~Earnings from ~~advisory~~equity ~~services~~method ~~increased~~investments ~~22%~~include toour ~~$1.2~~pro ~~billion. Investment~~rata ~~banking~~share ~~revenues~~of ~~from~~income ~~transactions~~and ~~involving~~losses ~~Bank~~associated with investments accounted for under the equity method of ~~America~~accounting. Earnings from equity method investments were $~~322~~285 million infor the year ended December 31, ~~2011~~2012 ~~and~~compared with $~~212~~347 million infor the year ended December 31, ~~2010~~2011. The decrease reflected lower revenues from certain equity method investments. Refer to Note 8 to the Consolidated Financial Statements for further information on equity method investments.

InIntercompany ~~2012,~~service ~~our~~fee ~~sales~~revenues ~~and~~from ~~trading~~Bank ~~revenue~~of ~~and~~America ~~investment~~include ~~banking~~revenues ~~fees~~associated ~~may~~with ~~continue~~the toprovision beof ~~adversely~~certain ~~affected~~shared bybusiness ~~lower~~activities ~~client~~with ~~activity~~Bank ~~and~~of ~~challenging~~America. Intercompany ~~market~~service ~~conditions~~fee asrevenues afrom ~~result~~Bank of, ~~among~~America ~~other~~were ~~things,~~$986 million in the ~~European~~year ~~sovereign~~ended ~~debt~~December ~~crisis~~31, ~~uncertainty~~2012, ~~regarding~~an ~~the~~increase ~~outcome~~ of 4% from the ~~evolving~~prior ~~domestic~~year. The ~~regulatory~~increase ~~landscape,~~was ~~our~~driven ~~credit~~by ~~ratings~~higher fees earned from Bank of America in connection with certain shared brokerage and ~~market~~trading ~~volatility~~activities.

~~Earnings~~Other ~~from~~revenues ~~equity~~include ~~method~~gains ~~investments~~and ~~include~~losses ~~our~~on ~~pro~~investment ~~rata~~securities, ~~share~~including ofcertain ~~income~~available-for-sale securities, gains and losses ~~associated~~on ~~with~~private equity investments, ~~accounted~~and ~~for~~gains ~~under~~and ~~the~~losses ~~equity~~on ~~method~~loans ofand ~~accounting.~~other ~~Earnings~~miscellaneous ~~from~~items. ~~equity~~Other ~~method~~revenues ~~investments~~ were $~~347 million~~1.9 ~~for~~billion in the year ended December 31, ~~2011~~2012 as compared with $~~898~~1.7 ~~million~~billion ~~for~~in the year ended December 31, ~~2010~~2011. Other ~~The decrease reflected lower~~ revenues ~~from~~for ~~certain~~the ~~equity~~year ~~method~~ended ~~investments~~December 31, ~~primarily~~2012 ~~BlackRock,~~included ~~Inc.~~a ~~(“BlackRock”). In~~gain ~~November~~of ~~2010,~~approximately we$370 ~~sold~~million afrom ~~substantial~~the ~~portion~~sale of ~~our~~a ~~investment~~Japanese inbrokerage ~~BlackRock,~~joint ~~which~~venture ~~reduced~~investment ~~our~~and ~~economic~~gains ~~interest~~of in$405 ~~BlackRock~~million resulting from ~~approximately~~the ~~34%~~repurchase toand ~~approximately~~retirement ~~7%. As~~of acertain ~~result~~ of ~~this~~our ~~transaction~~long-term borrowings, wewhile noOther ~~longer~~revenues ~~accounted~~ for ~~our investment in BlackRock under~~ the ~~equity~~year ~~method. Earnings~~ended ~~from~~December ~~equity~~31, ~~method~~2011 ~~investments in 2010~~ included a gain of $90377 million ~~associated~~from ~~with~~the ~~this~~ sale of our remaining investment in BlackRock, Inc. ~~Refer~~Other torevenues ~~Note 8~~in to2012 ~~the~~also ~~Consolidated~~reflected ~~Financial~~lower ~~Statements~~gains ~~for~~from ~~further~~certain ~~information~~private on equity ~~method~~ investments.

~~Intercompany~~Compensation ~~service~~and ~~fee~~benefits ~~revenues~~expenses ~~from~~were ~~Bank~~$14.6 ofbillion ~~America~~in ~~include~~the ~~revenues~~year ~~associated~~ended ~~with~~December 31, ~~the~~2012, ~~provision~~a decrease of ~~certain~~7% ~~shared~~from ~~business~~the ~~activities~~prior ~~with~~year ~~Bank of America~~period. ~~Intercompany~~The ~~service~~decrease ~~fee~~included ~~revenues~~lower ~~from~~amortization ~~Bank~~expense ofassociated ~~America~~with ~~were~~stock-based ~~$925~~compensation ~~million~~awards, inincluding ~~the~~awards ~~year~~granted ~~ended~~to ~~December~~retirement-eligible 31employees, ~~2011~~as compared with ~~$279 million in~~ the prior year. ~~The~~Salary ~~increase~~and ~~was~~other ~~driven~~compensation bycosts ~~higher~~also ~~fees~~decreased, ~~earned~~which ~~from~~was ~~Bank~~related ofto ~~America~~a decline in ~~connection~~employee ~~with~~headcount. Incentive-based ~~certain~~compensation ~~shared~~expense ~~brokerage~~also ~~and~~declined ~~trading~~as ~~activities~~compared with the prior year.

~~Other~~Non-compensation ~~revenues~~expenses ~~include~~were ~~gains~~$7.9 billion ~~and~~in ~~losses~~the onyear ~~investment~~ended ~~securities~~December 31, ~~including~~2012 ~~certain~~compared ~~available~~with $13.2 billion in the prior year. Non-~~for-sale~~compensation ~~securities~~expenses in the year ended December 31, ~~gains~~2012 included an expense reduction of $754 million to lower our liability for representations and ~~losses~~warranties onexposures, ~~private~~while ~~equity~~the ~~investments~~year ended December 31, ~~and~~2011 ~~gains~~included a provision for representations and ~~losses~~warranties onof ~~loans~~$2.7 billion. See “Off-Balance Sheet Exposures - Representations and ~~other~~Warranties” ~~miscellaneous~~for ~~items~~further information. Excluding ~~Other~~the ~~revenues~~impact of these items, non-compensation expenses were $1.8.6 billion and $10.5 billion in the ~~year~~years ended December 31, 2012 and December 31, 2011, asrespectively. Communications ~~compared~~and ~~with~~technology expenses were $41.36 billion inand ~~the~~decreased ~~year~~10%, ~~ended~~primarily ~~December~~due ~~31,~~to ~~2010~~lower costs for technology equipment and systems consulting. Occupancy ~~The~~and related depreciation expenses were $1.2 billion, a decrease ~~included~~of 12%, reflecting lower ~~gains~~rental ~~from~~and ~~certain~~other ~~private~~occupancy ~~equity~~costs. Brokerage, clearing and ~~other~~exchange ~~investments~~fees were $951 million and decreased 15%, asprimarily ~~well~~due asto lower ~~gains~~brokerage ~~associated~~and ~~with~~other ~~the~~fees ~~sale~~due ofto ~~certain~~lower ~~available-for-sale~~transaction ~~securities~~volumes. InProfessional ~~addition~~fees were $921 million, ~~the~~a ~~results~~decrease ~~for~~of ~~2010~~10% ~~included~~due ato ~~gain~~lower legal, consulting and employment services fees. Intercompany service fee expenses from Bank of ~~approximately~~America were $~~600 million~~1.8 ~~associated~~billion in the year ended December 31, 2012 compared with $2.3 billion in the ~~sale~~prior year. The decline reflected a lower level of ~~Bloomberg~~intercompany ~~Inc.~~service ~~notes~~fees tofrom Bank of America. ~~These~~Other ~~decreases~~expenses were ~~partially~~$1.6 ~~offset~~billion, by a ~~pre-tax~~decrease ~~gain~~ of ~~$377~~31%, ~~million~~reflecting ~~resulting~~a ~~from~~decline ~~the~~in ~~June~~litigation-related ~~2011~~expenses ~~sale~~as ofwell ~~our~~as ~~remaining~~certain ~~investment~~other ~~in BlackRock~~expenses.

~~Compensation~~The ~~and~~income ~~benefits~~tax ~~expenses~~benefit ~~were~~was $152.8 5 billion infor the year ended December 31, ~~2011,~~2012 an increase of 5% from the prior year period. The increase included higher amortization expense associated with stock-based compensation awards, including awards granted to retirement-eligible employees, as compared with ~~the~~an ~~prior~~income ~~year. Salary~~tax ~~and~~benefit other compensation costs also increased, which was related to investments in infrastructure. These increases were partially offset by lower incentive-based compensation expense as compared with the prior year, reflecting a decline in net revenues (adjusted for net revenues associated with the impact of ~~changes in our credit spreads on the valuation of certain of our long-term debt and derivative liabilities)~~$2.9 ~~The~~billion ~~increase was also partially offset by a charge~~ for an2011, ~~incremental~~resulting ~~U.K. employer payroll tax that was recorded~~ in ~~2010.~~effective ~~In April 2010, the U.K. enacted into law a one-time employer payroll~~ tax onrates ~~bonuses awarded to employees~~ of ~~applicable banking entities between December 9, 2009 and April 5, 2010~~112.8% ~~The impact of this tax was approximately $330 million~~ and ~~was included in our compensation and benefits expense for the year ended December 31~~64.1%, ~~2010~~respectively.

~~Non-compensation expenses were $13.2 billion in the year ended December~~ 31~~, 2011 compared with $8.9 billion in~~

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~~the~~Included ~~prior~~in ~~year~~the ~~period. Non-compensation~~income ~~expenses~~tax inbenefit ~~2011~~for ~~included~~2012 was a $21.7 billion ~~provision~~tax ~~for~~benefit ~~representations~~attributable ~~and~~to ~~warranties. See~~the ~~“Off-Balance~~excess ~~Sheet~~of ~~Exposures -~~foreign ~~Representations~~tax ~~and~~credits ~~Warranties”~~recognized ~~for~~in ~~further~~the ~~information~~U. ~~Communications and technology expenses were $1~~S.8 ~~billion,~~upon arepatriation ~~decrease~~ of ~~11%~~the ~~primarily~~earnings ~~due~~of tocertain ~~lower~~non-U.S. ~~costs~~subsidiaries ~~for~~over ~~technology~~the ~~equipment~~related ~~and systems consulting~~U.S. ~~Brokerage,~~tax ~~clearing and exchange fees were $1~~liability.1 A ~~billion,~~portion ~~an increase~~ of ~~10%,~~the ~~due~~foreign ~~primarily~~taxes tothat ~~higher~~resulted ~~brokerage~~in ~~and~~the ~~other~~credits ~~fees~~were ~~associated~~paid ~~with~~in the ~~global~~past ~~markets~~by ~~business. Advertising~~a ~~and~~certain ~~market~~Bank ~~development~~of ~~expenses~~America ~~were~~subsidiary ~~$500~~that ~~million,~~was anpart ~~increase~~ of ~~13%,~~the ~~due~~2012 ~~primarily~~intragroup ~~to higher travel and entertainment and marketing and promotional costs~~reorganization. ~~Intercompany~~As ~~service~~discussed ~~fee~~below, ~~expenses~~also ~~from~~included ~~Bank of America were $2.3 billion~~ in the ~~year~~income ~~ended~~tax ~~December~~benefit ~~31,~~was ~~2011~~a ~~compared~~$781 ~~with~~million ~~$0.5~~charge ~~billion~~to inreduce the ~~prior~~carrying ~~year. Beginning~~value ~~in 2011, Bank~~ of ~~America~~certain ~~and~~U.K. ~~Merrill~~net ~~Lynch~~deferred ~~integrated~~tax ~~their~~assets ~~methodologies~~due ~~for~~to ~~allocating~~the ~~expenses~~2% ~~associated~~U.K. ~~with~~corporate ~~shared~~income ~~services~~tax torate ~~their~~reduction ~~subsidiaries.~~that Aswas aenacted ~~result of this integration,~~ during ~~2011~~the ~~Merrill~~third ~~Lynch~~quarter ~~incurred a higher level~~ of ~~intercompany~~2012. Our ~~service~~effective ~~fees~~tax ~~from~~rate ~~Bank~~for of2012 ~~America~~excluding asthese ~~compared~~two ~~with~~items ~~the~~was ~~prior year~~72. ~~Other expenses were $~~2.3% ~~billion,~~and awas ~~decrease~~greater ofthan ~~8% from~~ the ~~prior~~statutory ~~year. The~~rate ~~decrease~~due ~~included~~to ~~lower~~the ~~expense~~impact ~~associated~~of ~~with~~other non-~~controlling~~U.S. ~~interests~~items, ofincluding ~~certain~~an ~~principal~~increase ~~investments~~in asour ~~well~~accumulated asearnings apresumed ~~prior~~to ~~year~~be ~~loss~~permanently ofreinvested ~~$190 million~~in ~~associated with a real estate private equity fund that we deconsolidated during the fourth quarter of 2010, partially offset by higher litigation~~non-~~related~~U.S. ~~expenses~~subsidiaries.

The income tax benefit for ~~the~~2011 ~~year~~was ~~ended~~driven ~~December~~by ~~31,~~our ~~2011~~recurring ~~was~~tax preference items, a $21.90 billion ~~compared~~benefit ~~with~~from anthe ~~income~~release of the remaining valuation allowance applicable to capital loss carryover deferred tax ~~expense~~asset and a benefit of $~~147~~593 million for ~~the~~planned ~~year~~realization ~~ended~~of ~~December~~previously ~~31,~~unrecognized ~~2010,~~deferred ~~resulting~~tax inassets ~~effective~~related ~~tax~~to ~~rates~~the oftax ~~62.8%~~basis ~~and~~in ~~3.8%,~~certain ~~respectively~~subsidiaries. ~~The~~These ~~2011~~benefits ~~effective~~were ~~tax~~partially ~~rate~~offset ~~was~~by ~~higher~~a ~~than~~$774 ~~for~~million ~~2010~~charge asfor the ~~impact~~U.K. ofcorporate ~~net~~income tax ~~benefit~~rate ~~items~~reduction ~~described~~enacted ~~below~~in ~~increased~~2011 ~~the~~and ~~income~~by ~~tax~~a ~~benefit~~$258 ~~recorded~~million oncharge ~~the~~to ~~2011~~establish ~~pre-tax~~a ~~loss~~valuation ~~whereas~~allowance for ~~2010~~a ~~net~~portion ~~tax~~of ~~benefits~~certain ~~decreased~~non-U.S. ~~tax~~deferred ~~expense recorded on pre-~~tax ~~income~~assets.

~~The~~On ~~income~~July ~~tax~~17, ~~rate~~2012, ~~for~~the ~~2011~~U.K. 2012 Finance Bill was ~~driven~~enacted, bywhich areduced $1the U.0K. ~~billion~~corporate ~~release~~income oftax ~~the~~rate ~~remaining~~by ~~valuation~~two ~~allowance~~percent ~~provided~~to ~~for~~23%. ~~capital~~The ~~loss~~first ~~carryforward~~one ~~tax~~percent ~~benefits~~reduction was effective April 1, 2012 and athe ~~benefit~~second ofwill ~~$593~~be ~~million~~effective ~~for~~April ~~planned~~1, ~~realization~~2013. ofThese ~~previously~~reductions ~~unrecognized~~favorably ~~deferred~~affect income tax ~~assets~~expense ~~related~~on tofuture ~~the~~U.K. ~~tax~~earnings, ~~basis~~but inalso ~~certain~~required ~~subsidiaries~~us to remeasure our U. ~~These~~K. ~~benefits~~net ~~were~~deferred ~~partially~~tax ~~offset~~assets byusing the ~~$774~~lower ~~million~~tax ~~charge~~rates. ~~due~~If to the U.K. corporate income tax rate ~~reduction~~were ~~discussed~~to ~~below~~be ~~and~~reduced to 21% by a2014, ~~$258~~as ~~million~~suggested ~~charge~~in toU.K. ~~establish~~Treasury aannouncements ~~valuation~~and ~~allowance~~assuming ~~for~~no change in the deferred tax asset balance, we would record a ~~portion~~charge to income tax expense of ~~certain~~approximately ~~non-U.S.~~$800 ~~deferred~~million ~~tax~~in ~~assets~~the period of enactment.

The 2010 income tax rate was driven by a $1.7 billion release of a valuation allowance provided for capital loss carryforward tax benefits and recurring tax preference items, partially offset by a $386 million charge for a one percent reduction to the U.K. tax rate enacted during 2010.

On July 19, 2011, the U.K. 2011 Finance Bill was enacted, which reduced the U.K. corporate income tax rate by one percent to 26% beginning on April 1, 2011, and then to 25% effective April 1, 2012. These rate reductions will favorably affect income tax expense on future U.K. earnings but also required us to remeasure our U.K. net deferred tax assets using the lower tax rates. As noted above, the income tax expense for 2011 included a $774 million charge for the remeasurement. If U.K. corporate income tax rates were to be reduced to 23% by 2014, as suggested in U.K Treasury announcements and assuming no change in the deferred tax asset balance, a charge to income tax expense of approximately $400 million for each one percent reduction in the rate would result in each period of enactment (for a total of approximately $800 million).

OFF-BALANCE SHEET EXPOSURES

As a part of our normal operations, we enter into various off-balance sheet arrangements that may require future payments. The table and discussion below outline our significant off-balance sheet arrangements, as well as their future expirations, as of December 31, ~~2011~~2012. Refer to Note 14 to the Consolidated Financial Statements for further information.



(dollars in millions)
			Expiration
	Maximum Payout		Less than 1 Year		1 - 3 Years		3 - 5 Years		Over 5 Years
Standby liquidity facilities	$	125	$	106	$	—	$	3	$	16
Residual value guarantees	320		320		—		—		—
Standby letters of credit and other guarantees	491		333		112		37		9

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(dollars in millions)
	Expiration
	MaximumPayout		Less than1 Year		1 - 3Years		3 - 5Years		Over 5Years
Standby liquidity facilities	$	761	$	186	$	555	$	3	$	17
Residual value guarantees	320		—		320		—		—
Standby letters of credit and other guarantees	429		280		99		31		19

Standby Liquidity Facilities

We provide standby liquidity facilities primarily to certain unconsolidated municipal bond securitization variable interest entities (“VIEs”). In these arrangements, we are required to fund these standby liquidity facilities if certain contingent events take place (e.g., a failed remarketing) and in certain cases if the fair value of the assets held by the VIE declines below the stated amount of the liquidity obligation. The potential exposure under the facilities is mitigated by economic hedges and/or other contractual arrangements entered into by Merrill Lynch. Refer to Note 9 to the Consolidated Financial Statements for further information.

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Residual Value Guarantees

At December 31, ~~2011~~2012, residual value guarantees of $320 million consist of amounts associated with certain power plant facilities. Payments under these guarantees would only be required if the fair value of such assets declined below their guaranteed value. As of December 31, ~~2011~~2012, no payments have been made under these guarantees and the carrying value of the associated liabilities was not material, as (i) Merrill Lynch believes that the estimated fair value of such assets was in excess of their guaranteed value and/or (ii) there is a very remote risk of future payment pursuant to the remaining contractual provisions.

Standby Letters of Credit

At December 31, ~~2011~~2012, we provided guarantees to certain counterparties in the form of standby letters of credit in the amount of $0.4 5 billion.

Representations and Warranties

In prior years, Merrill Lynch and certain of its subsidiaries, including First Franklin Financial Corporation (“First Franklin”), sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations (in a limited number of these securitizations, monolines insured all or some of the securities), or in the form of whole loans. Most of the loans sold in the form of whole loans were subsequently pooled into private-label securitizations sponsored by the third-party buyer of the whole loans. In addition, Merrill Lynch and First Franklin securitized first-lien residential mortgage loans generally in the form of mortgage-backed securities guaranteed by the government sponsored enterprises (the "GSEs"). In connection with these transactions, ~~Merrill~~we ~~Lynch~~ made various representations and warranties. Breaches of these representations and warranties may result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to the GSEs, whole-loan ~~buyers~~investors, securitization trusts or monoline insurers (collectively, “repurchases”). In all such cases, ~~Merrill~~we ~~Lynch~~ would be exposed to any credit loss on the repurchased mortgage loans after accounting for any mortgage insurance or mortgage ~~guaranty~~guarantee payments that itwe may receive.

Subject to the requirements and limitations of the applicable sales and securitization agreements, these representations and warranties can be enforced by the GSEs, the whole-loan ~~buyer~~investor, the securitization trustee, or others as governed by the applicable agreement or, in a limited number of first-lien and home equity securitizations where monoline insurers have insured all or some of the securities issued, by the monoline insurer., where the contract so provides. In the case of loans sold to parties other than the GSEs, the contractual liability to repurchase typically arises only if there is a breach of the representations and warranties that materially and adversely affects the interest of the investor, or investors, ~~in the loan~~ or of the monoline insurer (as applicable). in the loan. Contracts with the GSEs do not contain equivalent language.

36For additional information about accounting for representations and warranties and our representations and warranties repurchase claims and exposures, see Note 14 to the Consolidated Financial Statements.

We have vigorously contested any request for repurchase when we conclude that a valid basis for repurchase does not exist and will continue to do so in the future. We may reach settlements in the future if opportunities arise on terms we believe to be advantageous.

Recent Developments Related to the Bank of America BNY Mellon Settlement

As a result of Bank of America's settlement (the “BNY Mellon Settlement”) with the Bank of New York Mellon, as trustee (the “Trustee”) in the second quarter of 2011, Merrill Lynch determined that it had sufficient experience to record a liability of $2.7 billion in that period related to its exposure on certain private-label securitizations. Recent levels of claims and file requests with certain counterparties have been less than originally anticipated and, as a result, we recorded a reduction to non-interest expenses of $754 million in the year ended December 31, 2012 that lowered the liability for representations and warranties exposures, as a portion of the loss was no longer deemed probable.

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~~For~~The ~~additional~~BNY ~~information~~Mellon ~~about~~Settlement ~~accounting~~is subject to final court approval and certain other conditions. On August 10, 2012, the court issued an order setting a schedule for ~~representations~~discovery and ~~warranties~~other proceedings, and ~~our~~setting ~~representations~~May 2, 2013 as the date for the final court hearing on the settlement to begin. Bank of America and ~~warranties~~Merrill ~~claims~~Lynch are not parties to the proceeding. If final court approval is not obtained by December 31, 2015, Bank of America may withdraw from the BNY Mellon Settlement, if the Trustee consents. The BNY Mellon Settlement also provides that if trusts among the 525 first-lien and ~~exposures~~five second-lien non-GSE securitization trusts holding loans with an unpaid principal balance exceeding a specified amount are excluded from the final BNY Mellon Settlement, ~~see~~based ~~Note 14~~on investor objections or otherwise, Bank of America has the option to withdraw from the ~~Consolidated~~BNY ~~Financial~~Mellon ~~Statements~~Settlement pursuant to the terms of the BNY Mellon Settlement agreement.

~~Merrill~~It ~~Lynch~~is ~~has~~not ~~vigorously~~currently ~~contested~~possible ~~any~~to ~~request~~predict ~~for~~how ~~repurchase~~many ~~when~~parties itwill ~~has~~ultimately ~~concluded~~object ~~that~~to the BNY Mellon Settlement, whether the objections will prevent receipt of final court approval or the ultimate outcome of the court approval process, which can include appeals and could take a ~~valid~~substantial ~~basis~~period ~~for~~of ~~repurchase~~time. ~~does~~In ~~not~~particular, ~~exist~~conduct of discovery and ~~will~~the ~~continue~~resolution toof dothe soobjections into the ~~future.~~settlement ~~Merrill~~and ~~Lynch~~any ~~may~~appeals ~~reach~~could ~~settlements~~take ina substantial period of time and these factors could materially delay the ~~future~~timing ifof ~~opportunities~~final ~~arise~~court onapproval. ~~terms~~Accordingly, it ~~believes~~is not possible to bepredict ~~advantageous~~when tothe ~~Merrill~~court ~~Lynch~~approval process will be completed.

There can be no assurance that final court approval of the BNY Mellon Settlement will be obtained, that all conditions to the BNY Mellon Settlement will be satisfied or, if certain conditions to the BNY Mellon Settlement permitting withdrawal are met, that Bank of America will not withdraw from the settlement. If final court approval is not obtained or if Bank of America withdraws from the BNY Mellon Settlement in accordance with its terms, Merrill Lynch's future representations and warranties losses could be substantially different than existing accruals and the estimated range of possible loss over existing accruals.

OnUnresolved ~~June 28,~~Repurchase 2011, Bank of America and certain of its non-Merrill Lynch subsidiaries entered into a settlement agreement (subject to final court approval and certain other conditions) with The Bank of New York Mellon (“BNY Mellon”), as trustee, to resolve, among other claims, all outstanding and potential claims related to alleged representations and warranties breaches (including repurchase claims) with respect to the 525 legacy first-lien and five second-lien non-GSE residential mortgage-backed securitization trusts containing loans principally originated between 2004 and 2008 and for which BNY Mellon acts as trustee or indenture trustee (the “BNY Mellon Settlement”). As a result of the experience gained by Bank of America and certain of its non-Merrill Lynch affiliates in the BNY Mellon Settlement, Merrill Lynch determined that it had sufficient experience to record a $2.7 billion liability for representations and warranties related to its repurchase exposure on private-label securitizations in the year ended December 31, 2011.Claims

~~There~~Unresolved ~~can~~representations beand nowarranties ~~assurance~~repurchase ~~that~~claims ~~final~~represent ~~court~~the ~~approval~~notional amount of ~~the~~repurchase ~~BNY~~claims ~~Mellon~~made ~~Settlement~~by ~~will be obtained~~counterparties, ~~that~~typically ~~all conditions to~~ the ~~BNY~~outstanding ~~Mellon~~principal ~~Settlement~~balance ~~will be satisfied~~ or, ~~if certain conditions to~~ the ~~BNY~~unpaid ~~Mellon~~principal ~~Settlement~~balance ~~permitting~~at ~~withdrawal~~the ~~are~~time ~~met, that Bank~~ of ~~America~~default. In ~~and~~the ~~certain~~case of ~~its non~~first-~~Merrill~~lien ~~Lynch~~mortgages, ~~subsidiaries~~this ~~will~~amount ~~not determine to withdraw from the settlement. If final court approval~~ is ~~not~~often ~~obtained~~significantly orgreater ifthan ~~Bank of America and such subsidiaries determine to withdraw from~~ the ~~BNY~~expected ~~Mellon~~loss ~~Settlement~~amount indue ~~accordance with its terms, although Merrill Lynch is not a party~~ to the ~~proceedings,~~benefit ~~our~~of ~~future~~collateral ~~representations~~ and, ~~warranties losses could be substantially different than existing accruals and the estimated range of possible losses over existing accruals described above. Under an order entered by the court~~ in ~~connection~~some ~~with the BNY Mellon Settlement~~cases, ~~potentially~~mortgage ~~interested~~insurance ~~persons~~or ~~had~~mortgage ~~the~~guarantee ~~opportunity~~payments. toClaims ~~give~~received ~~notice~~from ofa ancounterparty ~~intent~~remain tooutstanding ~~object~~until to the ~~settlement~~underlying ~~(including~~loan onis ~~the basis that more information was needed) until August 30~~repurchased, ~~2011. Approximately 44 groups or entities appeared prior to~~ the ~~deadline;~~claim ~~two~~is ofrescinded ~~those~~by ~~groups or entities have subsequently withdrawn from~~ the ~~proceeding and one motion to intervene was denied. Certain of these groups or entities filed notices of intent to object~~counterparty, ~~made motions to intervene~~ or ~~both~~the ~~filed~~claim ~~notices~~is ofotherwise ~~intent to object and made motions to intervene~~resolved.

AnThe ~~investor~~notional ~~opposed~~amount toof ~~the~~unresolved ~~settlement~~repurchase ~~removed~~claims ~~the~~from ~~proceeding~~private-label securitization trustees, whole-loan investors and others increased to ~~federal~~$5.8 ~~court~~billion at December 31, 2012 compared with $1.1 Onbillion ~~October~~at 19December 31, 2011,. The increase in the ~~federal~~notional ~~court~~amount ~~denied~~of ~~BNY~~unresolved ~~Mellon's~~repurchase ~~motion~~claims is primarily due to ~~remand~~increases in the ~~proceeding~~submission toof ~~state~~claims ~~court. BNY~~by ~~Mellon~~private-label securitization trustees; the level of detail, assupport ~~well~~and asanalysis impacting overall claim quality, and, therefore, claims resolution; and the ~~investors~~lack ~~that~~of ~~have~~an ~~intervened~~established process to resolve disputes related to these claims. We anticipated an increase in ~~support~~aggregate non-GSE claims at the time of the BNY Mellon Settlement in June 2011, ~~petitioned~~and tosuch ~~appeal~~increase in aggregate non-GSE claims was taken into consideration in developing the ~~denial~~increase ofin ~~this~~our ~~motion~~representations and warranties liability at that time. Although Onrecent ~~November~~claims 4activity has been lower than anticipated, ~~2011~~we expect unresolved repurchase claims related to private-label securitizations to continue to increase as claims continue to be submitted by private-label securitization trustees, and there is not an established process for the ~~district~~ultimate ~~court~~resolution ~~entered~~of claims on which there is a ~~written~~disagreement. The ~~order~~documents ~~setting~~governing private-label securitizations require repurchase claimants to show that a ~~discovery~~breach ~~schedule,~~of representations and ~~discovery~~warranties ishad ~~ongoing.~~a Onmaterial ~~December~~adverse ~~27,~~impact ~~2011,~~on the Uclaimant.S. We ~~Court~~believe ofthis ~~Appeals~~to ~~for~~mean that the ~~Second~~claimant ~~Circuit~~is ~~accepted~~required to prove that the ~~appeal,~~breach ~~and~~caused ~~stated~~a loss to investors in anthe ~~amended~~trust ~~scheduling~~(or ~~order~~in certain cases, to the monoline insurer or other financial guarantor). We also believe that many of the defaults observed in private-label securitizations have been, ~~pursuant~~and continue to ~~statute~~be, itdriven ~~would~~by ~~rule~~external onfactors, such as the ~~appeal~~substantial bydepreciation ~~February~~in 27home prices, ~~2012~~persistently high unemployment and other negative economic trends, diminishing the likelihood that breaches of representations and warranties, where present, caused a loss.

It is not currently possible to predict how many of the parties who have appeared in the court proceeding will ultimately object to the BNY Mellon Settlement, whether the objections will prevent receipt of final court approval or the ultimate outcome of the court approval process, which can include appeals and could take a substantial period of time. In particular, conduct of discovery and the resolution of the objections to the settlement and any appeals could take a substantial period of time and these factors could materially delay the timing of final court approval. Accordingly, it is not possible to predict when the court approval process will be completed.34

Outstanding Claims

The table below presents outstanding repurchase claims by counterparty at December 31, 2011 and December 31, 2010.

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Outstanding Claims by Counterparty
(dollars in millions)
	December 31,
	2011		2010
GSEs	$	65	$	59
Monoline	136		48
Others(1)	1,101		517
Total	$	1,302	$	624

The table below presents unresolved representations and warranties claims by counterparty at December 31, 2012 and December 31, 2011. The unresolved repurchase claims include only claims where we believe that the counterparty has a basis to submit claims. During the year ended December 31, 2012, we received $4.8 billion of new repurchase claims, which consists of approximately $4.7 billion from private-label securitization trustees, $54 million from GSEs, $22 million from whole-loan investors and $17 million from monoline investors.

(1) The majority of these repurchase claims are from whole-loan buyers of subprime loans or trustees of private-label securitization trusts through which First Franklin sold subprime loans.



Unresolved Repurchase Claims by Counterparty
(dollars in millions)
	December 31,
	2012		2011
GSEs	$	93	$	65
Monoline	147		136
Whole-loan investors, private-label securitization trustees and other	5,805		1,101
Total	$	6,045	$	1,302

OfAt December 31, 2012, the ~~$1.3~~notional ~~billion~~amount of ~~outstanding~~unresolved repurchase claims aswas of$6,045 ~~December~~million. ~~31,~~We ~~2011,~~have weperformed ~~believe~~an ~~that~~initial ~~for~~review with respect to $~~620~~4,922 million, aof ~~valid~~these ~~defect~~claims ~~has~~and do not ~~been~~believe ~~identified~~a ~~which~~valid ~~would~~basis ~~constitute~~for anrepurchase ~~actionable~~has ~~breach~~been ofestablished ~~representations~~by ~~and~~the ~~warranties~~claimants. ~~The~~We are still in the process of reviewing the remaining $~~682~~1,123 million of these claims. When ~~are~~a claim has been denied and there has not been communication with the counterparty for six months, Merrill Lynch views these claims as inactive; however, they remain in the ~~process~~unresolved ofrepurchase ~~review.~~claims balance until resolution.

In ~~2011,~~addition weto ~~received~~the ~~$665~~total ~~million~~unresolved ~~of new~~ repurchase claims ~~from whole-loan and private-label securitization investors~~above, ~~predominately~~there ~~from~~are ~~private-label~~$1.3 ~~securitization~~billion ~~trustees~~in ~~received~~repurchase indemands ~~the~~outstanding ~~fourth~~from ~~quarter~~a ofmaster ~~2011. These~~servicer ~~claims~~where ~~from~~we ~~private-label~~believe ~~securitization~~the ~~trustees~~claimant ~~are~~has ~~still~~not insatisfied the ~~process~~contractual ofthresholds ~~being~~to ~~evaluated,~~direct ~~although~~the wesecuritization ~~believe~~trustee itto istake ~~likely~~action and/or that ~~some~~these ofdemands ~~the~~are ~~claims~~otherwise ~~will~~procedurally ~~meet~~or ~~the~~substantively ~~required standards~~invalid. ~~When~~We ado ~~claim has been denied and there has~~ not ~~been~~believe ~~communication with~~ the ~~counterparty~~$1.3 ~~for~~billion ~~six~~in ~~months,~~demands ~~Merrill~~received ~~Lynch~~are ~~views~~valid ~~these~~repurchase claims, asand ~~inactive;~~therefore ~~however,~~it ~~they~~is ~~remain~~not inpossible to predict the ~~unresolved~~resolution ~~claims~~with ~~balance~~respect ~~until~~to ~~resolution~~such demands.

As presented in the table below, Merrill Lynch paid $58 million during both the year ended December 31, 2011 and December 31, 2010 to resolve $62 million and $68 million, respectively, of repurchase claims through repurchase or indemnification payments to investors, resulting in a loss on the related loans at the time of repurchase or indemnification payment of $48 million in both periods. Cash paid for loan repurchases includes the unpaid principal balance of the loan plus past due interest. The amount of loss for loan repurchases is reduced by the fair value of the underlying loan collateral. The repurchase of loans and indemnification payments related to repurchase claims generally resulted from material breaches of representations and warranties related to the loans' material compliance with the applicable underwriting standards, including borrower misrepresentation, credit exceptions without sufficient compensating factors and non-compliance with underwriting procedures, although the actual representations and warranties made in a sales transaction and the resulting repurchase and indemnification activity can vary by transaction or investor. A direct relationship between the type of defect that causes the breach of representations and warranties and the severity of the realized loss has not been observed.Settlements

dollars in millions
	Year Ended December 31,
	2011		2010
Claims resolved (1)	$	62	$	68
Repurchases	12		13
Indemnification payments	46		45
Total	$	58	$	58

As presented in the table below, during the year ended December 31, 2012, we paid $73 million to resolve $73 million of repurchase claims through repurchase or reimbursement to investors or securitization trusts for losses they incurred, resulting in a loss on the related loans at the time of repurchase or reimbursement of $62 million. During the year ended December 31, 2011, we paid $58 million to resolve $62 million of repurchase claims through repurchase or reimbursement to investors or securitization trusts for losses they incurred, resulting in a loss on the related loans at the time of repurchase or reimbursement of $48 million. Cash paid for loan repurchases includes the unpaid principal balance of the loan plus past due interest. The amount of loss for loan repurchases is reduced by the fair value of the underlying loan collateral. The repurchase of loans and indemnification payments related to repurchase claims generally resulted from material breaches of representations and warranties related to the loans' material compliance with the applicable underwriting standards, including borrower misrepresentation, credit exceptions without sufficient compensating factors and non-compliance with underwriting procedures. The actual representations and warranties made in a sales transaction and the resulting repurchase and indemnification activity can vary by transaction or investor. A direct relationship between the type of defect that causes the breach of representations and warranties and the severity of the realized loss has not been observed.

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(dollars in millions)
	Year Ended December 31,
	2012		2011
Claims resolved ⁽¹⁾	$	73	$	62

Repurchases	14		12
Indemnification payments	59		46
Total payments	$	73	$	58

(1) Represents unpaid principal balance.

Liability for Representations and Warranties

The liability for representations and warranties is included in Interest and other payables on the Consolidated Balance Sheets, and the related provision is included in Non-interest expenses on the Consolidated Statements of Earnings (Loss) ~~Earnings~~. ~~The methodology used to estimate the liability for representations and warranties is a function of~~

38Our estimate of the liability for representations and warranties exposures and the corresponding range of possible loss is based on currently available information, significant judgment, and a number of other factors and assumptions that are subject to change. For additional information, see Note 14 to the Consolidated Financial Statements.

The liability for representations and warranties exposures and the corresponding estimated range of possible loss for these representations and warranties exposures do not consider any losses related to litigation matters disclosed in Note 14 to the Consolidated Financial Statements, nor do they include any potential securities law or fraud claims or potential indemnity or other claims against us. We are not able to reasonably estimate the amount of any possible loss with respect to any such securities law, fraud or other claims against us, except to the extent reflected in the aggregate range of possible loss for litigation and regulatory matters disclosed in Note 14 to the Consolidated Financial Statements; however, such loss could be material.

At December 31, 2012 and December 31, 2011, the liability for representations and warranties was $2.0 billion and $2.8 billion. As a result of the BNY Mellon Settlement in the second quarter of 2011, we determined that we had sufficient experience to record a liability of $2.7 billion in that period related to our exposure on certain private-label securitizations. Recent levels of claims and file requests with certain counterparties have been less than originally anticipated and, as a result, we recorded a reduction to non-interest expenses of $754 million in the year ended December 31, 2012 that lowered the liability for representations and warranties exposures, as a portion of the loss was no longer deemed probable.

Estimated Range of Possible Loss

Our estimated liability at December 31, 2012 for obligations under representations and warranties is necessarily dependent on, and limited by, a number of factors, including for private-label securitizations, the implied repurchase experience based on the BNY Mellon Settlement, as well as certain other assumptions and judgmental factors. Accordingly, future provisions associated with obligations under representations and warranties may be materially impacted if actual experiences are different from our historical experience or our understandings, interpretations or assumptions.

The representations and warranties liability represents our best estimate of probable incurred losses as of December 31, 2012. However, it is reasonably possible that future representations and warranties losses may occur in excess of the amounts recorded for these exposures. In addition, we have not recorded any representations and warranties liability for certain private-label securitizations sponsored by whole-loan investors, where we have little to no claim experience. We currently estimate that the range of possible loss for representations and warranties exposures, consisting primarily of non-GSE exposures, could be up to $1.1 billion over accruals at December 31, 2012, an increase of $0.6 billion from December 31, 2011. The increase in the range of possible loss was primarily

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~~the~~attributable ~~representations~~to ~~and warranties given and considers a variety of factors, which include, depending on~~ the ~~counterparty,~~reduction ~~actual~~in ~~defaults,~~our ~~estimated~~liability ~~future~~for ~~defaults,~~representations ~~historical~~and ~~loss~~warranties ~~experience,~~exposures ~~estimated~~discussed ~~home~~above. The ~~prices, other economic conditions,~~ estimated ~~probability~~range ~~that a repurchase claim will be received, consideration~~ of ~~whether~~possible ~~presentation~~loss ~~thresholds~~related ~~will be met, number of payments made by the borrower prior~~ to ~~default~~these ~~and~~representations ~~estimated probability that a loan will be required to be repurchased as well as other relevant facts~~ and ~~circumstances,~~warranties ~~such~~exposures asdoes ~~bulk~~not ~~settlements~~represent ~~and identity of the counterparty or type of counterparty, with whom~~ a ~~sale~~probable ~~was~~loss ~~made. The estimate of the liability for representations~~ and ~~warranties~~ is based on currently available information, significant judgment, and a number of ~~factors,~~assumptions ~~including those set forth above,~~ that are subject to change. ~~Changes~~ toFor ~~any~~additional ~~one~~information ofabout ~~these~~the ~~factors~~methodology ~~could~~used ~~significantly~~to ~~impact~~estimate the ~~estimate~~representations ofand ~~the~~warranties liability and ~~could~~the ~~have~~corresponding arange ~~material~~of ~~adverse~~possible ~~impact~~loss, onsee ~~our~~Note 14 ~~results~~to ofthe ~~operations~~Consolidated ~~for~~Financial ~~any particular period~~Statements.

AtFuture ~~December~~provisions ~~31,~~and/or ~~2011~~ranges of possible loss for representations and ~~December 31~~warranties may be significantly impacted if actual experiences are different from our assumptions in our predictive models, ~~2010~~including, without limitation, the ultimate resolution of the BNY Mellon Settlement, estimated repurchase rates, economic conditions, estimated home prices, consumer and counterparty behavior, and a variety of other judgmental factors. Adverse developments with respect to one or more of the assumptions underlying the liability for representations and warranties ~~was~~and ~~$2.8 billion~~the corresponding estimated range of possible loss could result in significant increases to future provisions and/or ~~$213 million,~~this ~~respectively~~estimated range of possible loss. AsFor ~~noted~~example, ~~above~~if courts, in the ~~year~~context ~~ended~~of ~~December~~claims ~~31,~~brought ~~2011~~by private-label securitization trustees, wewere ~~recorded~~to disagree with our interpretation that the underlying agreements require a ~~provision~~claimant ~~for~~to prove that the representations and warranties ~~related~~breach towas ~~our~~the ~~repurchase~~cause ~~exposure~~of onthe ~~private-label~~loss, ~~securitizations~~it could significantly impact the estimated range of $2possible loss.~~7 billion.~~

~~Estimated~~Additionally, ~~Range~~if recent court rulings related to monoline litigation, including one related to an affiliate of ~~Possible~~ours, ~~Loss~~that ~~for~~have ~~Non~~allowed sampling of loan files instead of requiring a loan-~~GSEs~~by-loan review to determine if a representations and warranties breach has occurred, are followed generally by the courts in other monoline litigation, private-label securitization counterparties may view litigation as a more attractive alternative as compared to a loan-by-loan review. Finally, although we believe that the representations and warranties typically given in non-GSE transactions are less rigorous and actionable than those given in GSE transactions, we do not have significant experience resolving loan-level claims in non-GSE transactions to measure the impact of these differences on the probability that a loan will be required to be repurchased.

We believe it is probable that additional claimants in certain types of securitizations may come forward with credible claims that meet the requirements of the terms of the securitizations. As a result of the BNY Mellon Settlement in the second quarter of 2011, we determined that we had sufficient experience to record a liability related to our exposure on certain private-label securitizations. We believe that with the additional $2.7 billion non-GSE representations and warranties provision recorded in the year ended December 31, 2011, we have provided for a substantial portion of our non-GSE representations and warranties exposures.

However, it is reasonably possible that future representations and warranties losses may occur in excess of the amounts recorded for these exposures. In addition, the BNY Mellon Settlement did not provide sufficient experience related to certain private-label securitizations sponsored by third-party whole-loan investors. As it relates to certain private-label securitizations sponsored by third-party whole-loan investors and certain whole loan sales, it is not possible to determine whether a loss has occurred or is probable and, therefore, no representations and warranties liability has been recorded in connection with these transactions.

We currently estimate that the range of possible loss for non-GSE representations and warranties exposure as of December 31, 2011 could be up to $0.5 billion over existing accruals. This estimated range of possible loss for non-GSE representations and warranties does not represent a probable loss, and is based on currently available information, significant judgment, and a number of assumptions, including those set forth below, that are subject to change.

The methodology used to estimate the non-GSE representations and warranties liability and the corresponding range of possible loss considers a variety of factors including Merrill Lynch's experience related to actual defaults, projected future defaults, historical loss experience, estimated home prices, other economic conditions and the experience of Merrill Lynch's affiliates. Among the factors that impact the non-GSE representations and warranties liability and the corresponding estimated range of possible loss are: (1) contractual material adverse effect requirements, (2) the representations and warranties provided, and (3) the requirement to meet certain presentation thresholds. The first factor is based on our belief that a non-GSE contractual liability to repurchase a loan generally arises only if the counterparties prove there is a breach of representations and warranties that materially and adversely affects the interest of the investor or all investors, or the monoline insurer (as applicable), in a securitization trust and, accordingly, we believe that the repurchase claimants must prove that the alleged representations and warranties breach was the cause of the loss. The second factor is related to the fact that non-GSE securitizations include different types of representations and warranties than those provided to the GSEs. We believe the non-GSE securitizations' representations and warranties are less rigorous and actionable than the explicit provisions of comparable agreements with the GSEs without regard to any variations that may have arisen as a result of dealings with the GSEs. The third factor is related to the fact that certain presentation thresholds need to be met in order for any repurchase claim to be asserted on the initiative of investors under the non-GSE agreements. A securitization trustee may investigate or demand repurchase on its own action, and most agreements contain a

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threshold, for example 25% of the voting rights per trust, that allows investors to declare a servicing event of default under certain circumstances or to request certain action, such as requesting loan files, that the trustee may choose to accept and follow, exempt from liability, provided the trustee is acting in good faith. If there is an uncured servicing event of default, and the trustee fails to bring suit during a 60-day period, then, under most agreements, investors may file suit. In addition to this, most agreements also allow investors to direct the securitization trustee to investigate loan files or demand the repurchase of loans, if security holders hold a specified percentage, for example, 25%, of the voting rights of each tranche of the outstanding securities.

Although we continue to believe that presentation thresholds are a factor in the determination of probable loss, given the BNY Mellon Settlement, the estimated range of possible loss assumes that the presentation threshold can be met for all of the non-GSE securitization transactions.

In addition, in the case of private-label securitizations, the methodology used to estimate the non-GSE representations and warranties liability and the corresponding range of possible loss considers the experience resulting from the BNY Mellon Settlement and assumes that the conditions to the BNY Mellon Settlement will be satisfied. Since the non-GSE transactions that were included in the BNY Mellon Settlement differ from those that were not included in the BNY Mellon Settlement, Merrill Lynch adjusted the experience implied in the settlement in order to determine the estimated non-GSE representations and warranties liability and corresponding range of possible loss. The judgmental adjustments made include consideration of the differences in the mix of products in the securitizations, loan originator, likelihood of claims differences, the differences in the number of payments that the borrower has made prior to default, and the sponsor of the securitization.

Future provisions and/or ranges of possible loss for non-GSE representations and warranties may be significantly impacted if actual experience is different from our assumptions in our predictive models, including, without limitation, those regarding the ultimate resolution of the BNY Mellon Settlement, estimated repurchase rates, economic conditions, home prices, consumer and counterparty behavior, and a variety of judgmental factors. Adverse developments with respect to one or more of the assumptions underlying the liability for representations and warranties and the corresponding estimated range of possible loss could result in significant increases to future provisions and/or this range of possible loss estimate. For example, if courts were to disagree with our interpretation that the underlying agreements require a claimant to prove that the representations and warranties breach was the cause of the loss, it could significantly impact this estimated range of possible loss. Additionally, if recent court rulings related to monoline litigation, including one related to an affiliate of ours, that have allowed sampling of loan files instead of requiring a loan-by-loan review to determine if a representations and warranties breach has occurred are followed generally by the courts, private-label securitization investors may view litigation as a more attractive alternative as compared to a loan-by-loan review. Finally, although Merrill Lynch believes that the representations and warranties typically given in non-GSE transactions are less rigorous and actionable than those given in GSE transactions, Merrill Lynch does not have significant loan-level experience in non-GSE transactions to measure the impact of these differences on the probability that a loan will be required to be repurchased.

The liability for obligations under representations and warranties with respect to GSE and non-GSE exposures and the corresponding estimated range of possible loss for non-GSE representations and warranties exposures do not include any losses related to litigation matters disclosed in Note 14 to the Consolidated Financial Statements, nor do they include any potential securities law or fraud claims or potential indemnity or other claims against us. Merrill Lynch is not able to reasonably estimate the amount of any possible loss with respect to any such securities law (except to the extent reflected in the aggregate range of possible loss for litigation and regulatory matters disclosed in Note 14 to the Consolidated Financial Statements), fraud or other claims against us; however, such loss could be material.

Experience with Non-GSE Investors

As presented in the table below, Merrill Lynch, including First Franklin, sold loans originated from 2004 to 2008 (primarily subprime and alt-A) with an original principal balance of $132 billion to investors other than the GSEs (although the GSEs are investors in certain private-label securitizations), of which approximately $6265 billion in principal has been paid off and $46 45 billion has defaulted or is severely delinquent (i.e., 180 days or more past due) at December 31, 2012.

40As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove there is a breach of the representations and warranties that materially and adversely affects the interest of the investor or all investors in a securitization trust or of the monoline insurer (as applicable). We believe that the longer a loan performs, the less likely it is that an alleged representations and warranties breach had a material impact on the loan's performance or that a breach even exists. Because the majority of the borrowers in this population would have made a significant number of payments if they are not yet 180 days or more past due, we believe that the principal balance at the greatest risk for repurchase claims in this population of private-label securitization investors are loans that already have defaulted and those that are currently severely delinquent. Additionally, only counterparties with the contractual right to demand repurchase of a loan can present valid repurchase claims. In the case of private-label securitization trust investors, they generally have to meet certain presentation thresholds in order to require trustees to present repurchase claims.

While we believe the agreements for private-label securitizations generally contain less rigorous representations and warranties and place higher burdens on investors seeking repurchases than the explicit provisions of the comparable agreements with the GSEs, without regard to any variations that may have arisen as a result of dealings with the GSEs, the agreements generally include a representation that underwriting practices were prudent and customary.

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atdelinquent loans stratified by the number of payments the borrower made prior to default or becoming severely delinquent as of December 31, 2012. In connection with these transactions, we provided representations and warranties, and the whole-loan investors may retain those rights even when the whole loans were aggregated with other collateral into private-label securitizations sponsored by the whole-loan investors. At least 25 payments have been made on approximately 60% of the defaulted and severely delinquent loans. In the current year, we have received approximately $4.7 billion of representations and warranties claims from private-label securitization trustees related to these vintages, and approximately $22 million from whole-loan investors related to these vintages. We believe that many of the defaults observed in these securitizations have been, and continue to be, driven by external factors, such as the substantial depreciation in home prices, persistently high unemployment and other negative economic trends, diminishing the likelihood that any loan defect (assuming one exists at all) was the cause of a loan's default. As of December 31, ~~2011~~2012, approximately 34% of the loans sold to non-GSE counterparties that were originated between 2004 and 2008 have defaulted or are severely delinquent.

As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove there is a breach of the representations and warranties that materially and adversely affects the interest of the investor or all investors in a securitization trust or of the monoline insurer (as applicable). Merrill Lynch believes that the longer a loan performs, the less likely it is that an alleged representations and warranties breach had a material impact on the loan's performance or that a breach even exists. Because the majority of the borrowers in this population would have made a significant number of payments if they are not yet 180 days or more past due, we believe that the principal balance at the greatest risk for repurchase claims in this population of private-label securitization investors is a combination of loans that have already defaulted and those that are currently severely delinquent. Additionally, the obligation to repurchase loans also requires that counterparties have the contractual right to demand repurchase of the loans (presentation thresholds). Private-label securitization investors generally do not have the contractual right to demand repurchase of loans directly or the right to access loan files.



(dollars in billions)
	Principal Balance										Principal at Risk
Entity	Original Principal Balance		Outstanding Principal Balance December 31, 2012		Outstanding Principal Balance Over 180 Days		Defaulted Principal Balance		Defaulted or Severely Delinquent		Borrower Made Less than 13 Payments		Borrower Made 13 to 24 Payments		Borrower Made 25 to 36 Payments		Borrower Made More Than 36 Payments
Merrill Lynch (excluding First Franklin)	$	50	$	14	$	4	$	13	$	17	$	3	$	4	$	3	$	7
First Franklin	82		18		5		23		28		5		6		5		12
Total⁽¹⁾	$	132	$	32	$	9	$	36	$	45	$	8	$	10	$	8	$	19

While we believe the agreements for private-label securitizations generally contain less rigorous representations and warranties and place higher burdens on investors seeking repurchases than the explicit provisions of the comparable agreements with the GSEs without regard to any variations that may have arisen as a result of dealings with the GSEs, the agreements generally include a representation that underwriting practices were prudent and customary.

The following table details the population of loans originated between 2004 and 2008 and the population of loans sold as whole loans or in non-GSE private-label securitizations by entity together with the defaulted and severely delinquent loans stratified by the number of payments the borrower made prior to default or becoming severely delinquent at December 31, 2011. In connection with these transactions, we provided representations and warranties, and the whole loan investors may retain those rights even when the whole loans were aggregated with other collateral into private-label securitizations sponsored by the whole loan investors. At least 25 payments have been made on approximately 63% of the defaulted and severely delinquent loans. Merrill Lynch believes many of the defaults observed in these securitizations have been, and continue to be, driven by external factors, such as the substantial depreciation in home prices, persistently high unemployment and other negative economic trends, diminishing the likelihood that any loan defect (assuming one exists at all) was the cause of a loan's default. As of December 31, 2011, approximately 35% of the loans sold to non-GSEs that were originated between 2004 and 2008 have defaulted or are severely delinquent.

(dollars in billions)
	Principal Balance										Principal at Risk
Entity	OriginalPrincipalBalance		OutstandingPrincipalBalanceDecember 31, 2011		OutstandingPrincipalBalanceOver 180 Days		Defaulted Principal Balance		Defaultedor Severely Delinquent		BorrowerMade Lessthan 13Payments		BorrowerMade 13 to24 Payments		BorrowerMade 25 to36 Payments		BorrowerMade MoreThan 36Payments
Merrill Lynch (excluding First Franklin)	$	50	$	16	$	6	$	12	$	18	$	3	$	4	$	3	$	8
First Franklin	82		21		7		21		28		4		6		5		13
Total (1)	$	132	$	37	$	13	$	33	$	46	$	7	$	10	$	8	$	21

(1) Excludes transactions sponsored by Merrill Lynch where no representations or warranties were made.

Prior to 2011, the majority of the claims that we received were from third-party whole-loan investors. In 2011, we received $665 million of new repurchase claims from whole-loan and private-label securitization investors, predominately from private-label securitization trustees received in the fourth quarter of 2011. In addition, there has been an increase in requests for loan files from private-label securitization trustees. We believe it is likely that these requests will lead to an increase in repurchase claims from private-label securitization trustees that meet the required standards.

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Legal Matters

Merrill Lynch has been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation arising in connection with its activities as a global diversified financial services institution. Refer to Note 14 to the Consolidated Financial Statements for further information, including the estimated aggregate range of possible loss.

Derivatives

We record all derivative transactions at fair value on our Consolidated Balance Sheets. We do not monitor our exposure to derivatives based on the notional amount because that amount is not a relevant indicator of our risk to these contracts, as it is generally not indicative of the amount that we would owe on the contract. Instead, a risk framework is used to define risk tolerances and establish limits to help to ensure that certain risk-related losses occur within acceptable, predefined limits. Derivatives that meet the accounting definition of a guarantee and credit derivatives are included in Note 6 to the Consolidated Financial Statements.

Involvement with VIEs

We transact with VIEs in a variety of capacities, including those that we help establish as well as those initially established by third parties. We utilize VIEs in the ordinary course of business to support our own and our customers' financing and investing needs. Merrill Lynch securitizes loans and debt securities using VIEs as a source of funding and a means of transferring the economic risk of the loans or debt securities to third parties. We also administer, structure or invest in or enter into derivatives with other VIEs, including multi-seller conduits, municipal bond trusts, collateralized debt obligations ("CDOs") and other entities~~, as described in more detail below~~. Our involvement with VIEs can vary and we are required to continuously reassess prior consolidation and disclosure conclusions (refer to Note 9 to the Consolidated Financial Statements). Refer to Note 1 to the Consolidated Financial Statements for a discussion of our consolidation accounting policy ~~and for information regarding new VIE accounting rules that became effective on January 1, 2010~~. ~~Types of VIEs with which we have historically transacted include:~~

~~• Municipal bond securitization VIEs: VIEs that issue medium-term paper, purchase municipal bonds as collateral and purchase a guarantee to enhance the creditworthiness of the collateral.~~38

• Asset-backed securities VIEs: VIEs that issue different classes of debt, from super senior to subordinated, and equity and purchase assets as collateral, including residential mortgages, commercial mortgages, auto leases and credit card receivables.

• CDOs: VIEs that issue different classes of debt, from super senior to subordinated, and equity and purchase securities, including asset-backed securities collateralized by residential mortgages, commercial mortgages, auto leases and credit card receivables as well as corporate bonds.

• Synthetic CDOs: VIEs that issue different classes of debt, from super senior to subordinated, and equity, purchase high-grade assets as collateral and enter into a portfolio of credit default swaps to synthetically create the credit risk of the issued debt.

• Credit-linked note VIEs: VIEs that issue notes linked to the credit risk of a company, purchase high-grade assets as collateral and enter into credit default swaps to synthetically create the credit risk to pay the return on the notes.

• Trust preferred security VIEs: These VIEs hold junior subordinated debt issued by ML & Co. or our subsidiaries, and issue preferred stock on substantially the same terms as the junior subordinated debt to third party investors. We also provide a parent guarantee, on a junior subordinated basis, of the distributions and other payments on the preferred stock to the extent that the VIEs have funds legally available. The debt we issue into the VIE is classified as long-term borrowings on our Consolidated Balance Sheets. The ML & Co. parent guarantees of its own subsidiaries are not required to be recorded in the Consolidated Financial Statements.

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Contractual Obligations

We have contractual obligations to make future payments of debt, lease and other agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. Other obligations include our contractual funding obligations related to our employee benefit plans. See Notes 12, 14 and 15 to the Consolidated Financial Statements.

In the normal course of business, we periodically guarantee the obligations of affiliates in a variety of transactions including International Swaps and Derivatives Association, Inc. ("ISDA") -related and non ISDA-related transactions such as commodities trading, repurchase agreements, prime brokerage agreements and other transactions. We have also entered into an agreement with a non-U.S. regulator that could allow it, in its capacity as regulator, to request payments from us to support obligations to clients of the regulated non-U.S. branch. We believe the likelihood of payment under the terms of this agreement to be remote.

FUNDING AND LIQUIDITY

Funding

We fund our assets primarily with a mix of secured and unsecured liabilities through a globally coordinated funding strategy with Bank of America. We fund a portion of our trading assets with secured liabilities, including repurchase agreements, securities loaned and other short-term secured borrowings, which are less sensitive to our credit ratings due to the underlying collateral. Refer to Note 12 to the Consolidated Financial Statements for additional information regarding our borrowings.

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 $57.20 billion of securities guaranteed by Bank of America at December 31, ~~2011~~2012. In addition, Bank of America has guaranteed the performance of Merrill Lynch on certain derivative transactions. The aggregate amount of such derivative liabilities was approximately $01.63 billion at December 31, ~~2011~~2012.

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 the London Interbank Offered Rate ("LIBOR") that is reset periodically and is consistent with other intercompany agreements. This credit line was renewed effective January 1, ~~2012~~2013 with a maturity date of January 1, ~~2013~~2014. 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~~under the line of credit at December 31, 2012 and December 31, 2011.

In addition to the $75 billion unsecured line of credit, athere ~~$25 billion~~is ~~364-day~~also a revolving unsecured line of credit that allows ML & Co. to borrow ~~funds~~up to $25 billion from Bank of America ~~was established on February 15, 2011~~. Interest on borrowings under the line of credit is based on prevailing short-term market rates. The ~~agreement~~line of credit does not contain any financial or other covenants. The line of credit matures on February 1211, ~~2013~~2014. There were no outstanding borrowings ~~against~~under the line of credit at December 31, 2012 and 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.39

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

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~~loan~~Merrill ~~agreement~~Lynch ~~contains~~Pierce aFenner ~~provision~~& ~~that~~Smith ~~automatically~~Incorporated ~~extends~~("MLPF&S") ~~the~~also ~~loan's~~has ~~maturity~~the byfollowing ~~one~~borrowing ~~year~~agreements ~~unless~~with Bank of America ~~provides 13 months written notice not to extend prior to the scheduled maturity date.~~:

• ~~MLPF&S~~A ~~assumed a~~ $74 billion one-year revolving ~~subordinated~~unsecured line of credit ~~with~~- ~~Bank~~Interest ofon ~~America.~~the ~~The subordinated~~ line of credit ~~bears~~is ~~interest~~ based on aprevailing ~~spread~~short-term tomarket ~~LIBOR,~~rates. ~~and~~The ~~has~~credit aline ~~scheduled~~matures ~~maturity~~on ~~date~~November ~~of October~~ 1, 2013. ~~The~~and ~~revolving~~may ~~subordinated~~automatically ~~line~~be ofextended ~~credit~~by ~~contains~~one ayear ~~provision~~to ~~that automatically extends~~ the ~~maturity~~succeeding byNovember ~~one~~1st ~~year~~ unless Bank of America provides ~~13 months~~ written notice not to extend at least 45 days prior to the ~~scheduled~~ maturity date. At both December 31, 2012 and December 31, 2011, ~~$1.1~~there ~~billion~~were ~~was~~no outstanding onborrowings under the ~~subordinated~~ line of credit.

• OnA ~~November 1, 2010, a~~ $415 billion ~~one~~364-~~year~~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 ~~credit~~ line ~~will~~of ~~mature~~credit matures on ~~November~~February 118, ~~2012~~2014. ~~and~~At ~~may~~December ~~automatically~~31, be2012 ~~extended~~and byDecember ~~one~~31, ~~year~~2011, toapproximately ~~the~~$0.9 ~~succeeding~~billion ~~November~~and ~~1st unless Bank of America provides written notice not to extend at least 45 days prior to the maturity date~~$1.5 ~~At December 31~~billion, ~~2011~~respectively, ~~there~~was ~~were no borrowings~~ outstanding onunder the line of credit.

•During Onthe ~~February~~year 22ended December 31, ~~2011~~2012, a $152.6 billion ~~364-day~~that ~~revolving~~was ~~unsecured~~outstanding ~~line~~under ofthe ~~credit~~following ~~that allows~~ MLPF&S toborrowing ~~borrow~~agreements ~~funds~~with ~~from~~ Bank of America was ~~established.~~repaid ~~Interest~~and on the ~~line~~agreements ofwere ~~credit is based on prevailing short-term market rates~~terminated. The ~~line~~two ofterminated ~~credit~~agreements ~~matures~~below onwere ~~February~~replaced ~~19,~~by ~~2013.~~intercompany Atfunding ~~December~~arrangements ~~31,~~between ~~2011,~~MLPF&S ~~approximately~~and ~~$1.5~~ML ~~billion~~& ~~was outstanding on the line of credit~~Co.

~~Bank~~• ofA ~~America~~subordinated ~~and~~loan ~~Merrill~~agreement ~~Lynch~~for ~~have~~approximately ~~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~~, 2013 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~~.5 ~~There were no amounts outstanding at December 31, 2011 and approximately $6.1~~ billion ~~outstanding at December 31, 2010 under this credit facility. In addition, in October 2011, Merrill Lynch entered into a short~~-~~term~~ ~~revolving credit facility that will allow Bank of America to borrow up to an additional $25 billion.~~ Interest ~~on borrowings~~ under ~~the~~this ~~credit~~agreement ~~facility~~was iscalculated based on ~~prevailing~~a ~~short-term~~spread ~~market~~to ~~rates~~LIBOR. ~~At December 31, 2011, approximately $3.7 billion was outstanding under this credit facility.~~


•	A $7.0 billion revolving subordinated line of credit - Interest under this agreement was calculated based on a spread to LIBOR.

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 1^st 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. At December 31, 2012 and December 31, 2011, approximately $16.2 billion and $3.7 billion, respectively, was outstanding under this credit facility.

Credit Ratings

Our borrowing costs and ability to raise funds are ~~directly~~ impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including OTC derivatives. Thus, it is our objective to maintain high-quality credit ratings.

Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings and other securities, including asset securitizations. Following the acquisition of Merrill Lynch by Bank of America, the ~~primary~~major credit rating agencies have indicated that the ~~major~~primary drivers of Merrill Lynch's credit ratings are Bank of America's credit ratings. Bank of America's credit ratings are subject to ongoing review by the rating agencies, which consider a number of factors, including Bank of America's financial strength, performance, prospects and operations as well as factors not under Bank of America's control. The rating agencies could make adjustments to our ratings at any time and they provide no assurances that they will maintain our ratings at current levels.

Other factors that influence Bank of America's and our credit ratings include changes to the rating agencies' methodologies for our industry or certain security types, the rating agencies' assessment of the general operating environment for financial services companies, our mortgage exposures, our relative positions in the markets in which we compete, reputation, liquidity position, diversity of funding sources, funding costs, the level and volatility of earnings, corporate governance and risk management policies, capital position, capital management practices and current or future regulatory and legislative initiatives.

4440

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~~Each~~which ofwe ~~the three primary rating agencies~~compete, ~~Moody's~~reputation, ~~S&P~~liquidity ~~and Fitch~~position, ~~downgraded~~diversity ~~Bank~~ of ~~America's~~funding ~~and ML & Co.'s ratings in late 2011. They have each also indicated that~~sources, asfunding ~~a systemically important financial institution~~costs, ~~Bank of America's (and consequently ML & Co.'s) credit ratings currently reflect their expectation that, if necessary, Bank of America would receive significant support from~~ the ~~U.S. government.~~level ~~They have indicated that they will continue to assess this view of support as financial services regulations~~ and ~~legislation~~volatility ~~evolve. On December 15, 2011, Fitch downgraded Bank~~ of America's and ML & Co.'s long-term and short-term debt ratings as a result of Fitch's decision to lower its "support floor" for systemically important U.S. financial institutions. This downgrade resolves the Rating Watch Negative that Fitch placed on Bank of America's and ML & Co.'s ratings on October 22earnings, ~~2010. On~~corporate ~~November~~governance ~~29, 2011, S&P downgraded Bank of America's~~ and MLrisk &management ~~Co.'s long-term and short-term debt ratings as a result of S&P's implementation of revised methodologies for determining Banking Industry Country Risk Assessments and bank ratings. On September 21~~policies, ~~2011,~~capital Moody's downgraded Bank of America's and ML & Co.'s long-term and short-term debt ratings as a result of Moody's lowering the amount of uplift for potential U.S. government support it incorporates into ratings. On February 15position, ~~2012, Moody's placed Bank of America's long-term debt ratings on review for possible downgrade as part of their review of financial institutions with global~~ capital ~~markets~~management ~~operations. Any adjustment to Bank of America's (and consequently~~practices, our) ratings will be determined based on Moody's review; however, the agency offered guidance that downgrades to Bank of America's ratings, if any, would likely be limited to one notch. The rating agencies could make further adjustments to Bank of America's (and ~~consequently,~~current ~~our)~~or ~~ratings~~future atregulatory ~~any time~~ and ~~provide~~legislative ~~no assurances that they will maintain our ratings at current levels~~initiatives.

~~Currently~~On December 20, 2012, Standard & Poor's Ratings Services ("S&P") published a full credit analysis report on Bank of America's, leaving the credit ratings for Bank of America and, consequently, ML & Co.'s ~~long-term/short-term~~unchanged ~~senior~~as ~~debt~~of ~~ratings~~that ~~and~~date. ~~outlooks~~On ~~expressed~~October by10, 2012, Fitch Ratings ("Fitch") announced the ~~rating~~results ~~agencies~~of ~~are~~its asperiodic ~~follows:~~review ~~Baa1/P-2~~of ~~(negative)~~its byratings ~~Moody's;~~for ~~A-/A-2~~12 ~~(negative)~~large, bycomplex ~~S&P;~~securities trading and ~~A/F1~~universal ~~(stable)~~banks, byincluding ~~Fitch~~Bank of America. As ~~MLPF&S~~part of this action, Fitch affirmed Bank of America's ~~long-term/short-term~~and ~~senior~~ML ~~debt~~& Co.'s credit ratings. ~~and~~On ~~outlooks~~June ~~are~~21, ~~A/A-1~~2012, Moody's Investors Service, Inc. (~~negative~~"Moody's") bycompleted ~~S&P~~its ~~and~~previously-announced ~~A/F1~~review ~~(stable)~~for bypossible ~~Fitch.~~downgrade ~~Merrill~~of ~~Lynch~~financial ~~International~~institutions with global capital markets operations, adowngrading ~~U.K.-based~~the ~~registered~~ratings ~~investment~~of ~~firm~~15 banks and ~~subsidiary~~securities firms, including the ratings of Bank of America and ML & Co., Bank ~~has~~of aAmerica's and ML & Co.'s long-term~~/short-term~~ ~~senior~~ debt ~~rating~~ratings ~~and~~were ~~outlook~~downgraded ofone ~~A/A-1~~notch ~~(negative)~~as bypart ~~S&P~~of this action. ~~Merrill~~The ~~Lynch~~Moody's ~~International~~downgrade ~~Bank~~has ~~Limited~~not had a material impact on our financial condition, anresults ~~Ireland-based~~of ~~bank~~operations ~~subsidiary~~or liquidity. Each of MLthe three major rating agencies, Moody's, S&P ~~Co.~~and Fitch, ~~has~~downgraded athe ~~long-term/short-term~~ratings ~~senior~~of ~~debt~~Bank ~~rating~~of America and ~~outlook~~ML of& ~~A/F1~~Co. ~~(stable)~~in bylate ~~Fitch~~2011.

ACurrently, ~~further~~Bank ~~reduction in certain~~ of ~~our~~America's ~~credit~~and ~~ratings~~ML ~~may~~& ~~have~~Co.'s along-term/short-term ~~material~~senior ~~adverse~~debt ~~effect~~ratings onand ~~our~~outlooks ~~liquidity,~~expressed ~~access~~by ~~to credit markets,~~ the ~~related~~rating ~~cost~~agencies ofare ~~funds,~~as ~~our~~follows: ~~businesses~~Baa2/P-2 ~~and~~(negative) onby ~~certain~~Moody's; ~~trading~~A-/A-2 ~~revenues,~~(negative) ~~particularly~~by inS&P; ~~those~~and ~~businesses~~A/F1 ~~where~~(stable) ~~counterparty~~by ~~creditworthiness is critical~~Fitch. MLPF&S's Inlong-term/short-term ~~addition,~~senior ~~under~~debt ~~the~~ratings ~~terms of certain OTC derivative contracts~~ and ~~other~~outlooks ~~trading~~are ~~agreements,~~A/A-1 ~~the~~(negative) ~~counterparties~~by toS&P ~~those~~and ~~agreements~~A/F1 ~~may~~(stable) ~~require~~by usFitch. toMerrill ~~provide~~Lynch ~~additional collateral~~International, ora toU.K.-based ~~terminate~~registered ~~these~~investment ~~contracts~~firm ~~or agreements, which could cause us to sustain losses~~ and~~/or~~ ~~adversely~~subsidiary ~~impact our liquidity. If Bank~~ of ~~America's or~~ ML & Co's., has a long-term/short-term ~~credit~~senior ~~ratings,~~debt orrating ~~those~~and outlook of ~~our bank or broker~~A/A-~~dealer~~1 ~~subsidiaries,~~(negative) ~~were~~by ~~downgraded~~S&P. byMerrill ~~one~~Lynch orInternational ~~more~~Bank ~~levels~~Limited, ~~the~~an ~~potential loss of access to short~~Ireland-~~term~~based ~~funding~~bank ~~sources~~subsidiary ~~such~~of asML ~~repurchase~~& ~~agreement financing~~Co., ~~and~~has ~~the~~a ~~effect~~long-term/short-term onsenior ~~our~~debt ~~incremental~~rating ~~cost~~and outlook of ~~funds~~A/F1 ~~and~~(stable) ~~earnings~~by ~~could be material~~Fitch.

AtThe ~~December~~major ~~31, 2011, if the~~ rating agencies ~~had~~have ~~downgraded~~each ~~their~~indicated ~~long-term~~that, ~~senior~~as ~~debt~~a ~~ratings~~systemically ~~for~~important MLfinancial &institution, ~~Co.~~Bank ~~or certain~~of ~~subsidiaries~~America's by(and ~~one~~consequently ~~incremental~~ML & ~~notch,~~Co.'s) ~~the~~credit ~~amount~~ratings ofcurrently ~~additional~~reflect ~~collateral~~their ~~contractually~~expectation ~~required~~that, byif ~~derivative~~necessary, ~~contracts~~Bank ~~and~~of ~~other~~America ~~trading~~would ~~agreements~~receive ~~would~~significant ~~have~~support ~~been~~from ~~approximately~~the $0U.~~4 billion~~S. If government, ~~the~~and ~~rating~~that ~~agencies~~they ~~had~~will ~~downgraded~~continue ~~their~~to ~~long-term~~assess ~~senior~~such ~~debt~~support ~~ratings~~in ~~for~~the MLcontext &of ~~Co.~~sovereign orfinancial ~~certain~~strength ~~subsidiaries~~and byregulatory aand ~~second~~legislative ~~incremental notch, approximately $0~~developments.3 ~~billion in additional collateral would have been required.~~

~~Also~~A further reduction in certain of our credit ratings may have a material adverse effect on our liquidity, ifpotential ~~the~~loss ~~rating~~of ~~agencies~~access ~~had~~to ~~downgraded~~credit ~~their~~markets, ~~long-term~~the ~~senior~~related ~~debt~~cost ~~ratings~~of ~~for~~funds, MLour &businesses ~~Co.~~and oron certain ~~subsidiaries~~trading byrevenues, ~~one~~particularly ~~incremental~~in ~~notch~~those businesses where counterparty creditworthiness is critical. In addition, under the terms of certain OTC derivative ~~liability~~contracts ~~that~~and ~~would~~other betrading ~~subject~~agreements, toin ~~unilateral~~the ~~termination~~event byof ~~counterparties~~further asdowngrades of ~~December~~our 31credit ratings, ~~2011~~the ~~was~~counterparties ~~$0.5~~to ~~billion,~~those ~~against~~agreements ~~which~~may ~~$0.3~~require ~~billion~~us ofto provide additional collateral, ~~had~~or ~~been~~to ~~posted.~~terminate ~~Further,~~these ifcontracts ~~the~~or ~~rating~~agreements, ~~agencies~~which ~~had~~could ~~downgraded~~cause ~~their~~us ~~long-term~~to ~~debt~~sustain ~~ratings~~losses ~~for~~and/or MLadversely &impact Coour liquidity. orIf ~~certain~~Bank ~~subsidiaries~~of byAmerica's aor ~~second~~ML & ~~incremental~~Co.'s ~~notch~~short-term credit ratings, ~~the~~or ~~derivative~~those ~~liability~~of ~~that~~our ~~would~~bank beor ~~subject~~broker-dealer tosubsidiaries, ~~unilateral~~were ~~termination~~downgraded by one or more levels, the ~~counterparties~~potential asloss of ~~December~~access ~~31,~~to ~~2011~~short-term ~~was~~funding ansources, ~~incremental~~such ~~$3.5~~as ~~billion~~repurchase agreement financing, ~~against~~and ~~which~~the ~~$3.4~~effect ~~billion~~on our incremental cost of ~~collateral~~funds ~~had~~could ~~been~~be ~~posted~~material.

~~While~~At December 31, 2012, if the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain ~~potential~~subsidiaries ~~impacts~~by ~~are~~one ~~contractual~~incremental notch, the amount of additional collateral contractually required by derivative contracts and ~~quantifiable,~~other trading agreements would have been approximately $0.4 billion. If the ~~full~~rating ~~consequences~~agencies ofhad adowngraded ~~credit~~their long-term senior debt ratings ~~downgrade~~for toML a& ~~financial~~Co. ~~institution~~or ~~are~~certain ~~inherently~~subsidiaries ~~uncertain~~by a second incremental notch, asapproximately ~~they~~$4.0 ~~depend~~billion ~~upon~~in ~~numerous~~additional ~~dynamic,~~incremental ~~complex~~collateral ~~and~~would ~~inter-~~have been required.

45Also, if the rating agencies had downgraded their long-term senior debt ratings for ML & Co. or certain subsidiaries by one incremental notch, the derivative liability that would be subject to unilateral termination by counterparties as of December 31, 2012 was $1.9 billion, against which $1.2 billion of collateral has been posted. If the rating agencies had downgraded their long-term debt ratings for ML & Co. or certain subsidiaries by a second incremental notch, the derivative liability that would be subject to unilateral termination by counterparties as of December 31, 2012 was an incremental $1.3 billion, against which $0.7 billion of collateral has been posted.

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While certain potential impacts are contractual and quantifiable, the full scope of consequences of a credit ratings downgrade to a financial institution is inherently uncertain, as it depends upon numerous dynamic, complex and inter-related factors and assumptions, including whether any downgrade of a firm's long-term credit ratings precipitates downgrades to its short-term credit ratings, and assumptions about the potential behaviors of various customers, investors and counterparties.

~~During~~For ~~the~~information ~~third~~regarding ~~quarter~~the ofadditional ~~2011,~~collateral ~~Moody's~~ and ~~S&P~~termination ~~placed~~payments ~~the~~that ~~sovereign~~would ~~rating~~be ofrequired ~~the~~in ~~U.S.~~connection onwith ~~review~~certain ~~for~~OTC ~~possibility~~derivative ofcontracts aand ~~default~~other ontrading ~~the~~agreements ~~government's~~as ~~debt obligations because of~~ a ~~failure~~result ~~to increase the debt limit. On August 2, 2011, Moody's affirmed its Aaa rating and revised its outlook to negative. On August 5, 2011, S&P downgraded the long-term sovereign credit rating~~ of ~~the~~such ~~U.S.~~a ~~to AA+, and affirmed the short-term sovereign~~ credit ~~rating;~~ratings ~~the outlook is negative. On November 28~~downgrade, ~~2011,~~see ~~Fitch~~Note 6 ~~affirmed its AAA long-term rating of the U.S., but changed the outlook from stable~~ to ~~negative. On~~ the ~~same~~Consolidated ~~day,~~Financial ~~Fitch~~Statements ~~affirmed~~and ~~its F1+ short-term rating of the U~~Item 1A.~~S. All~~ ~~three~~"Risk ~~rating agencies have indicated that they will continue to assess fiscal projections and consolidation measures, as well as the medium-term economic outlook for the U~~Factors.S."

46As part of Bank of America's efforts to streamline its organizational structure and reduce complexity and costs, it has reduced and intends to continue to reduce the number of its subsidiaries, including through intercompany mergers. In connection with these efforts, Bank of America may merge ML & Co. with and into Bank of America Corporation. There is no assurance such merger will occur or the timing thereof. Any such merger would be subject to applicable regulatory approvals, consents and other conditions of closing.

U.S. Sovereign Credit Ratings

On June 8, 2012, S&P affirmed its AA+ long-term and A-1+ short-term sovereign credit rating on the U.S. government. The outlook remains negative. On July 10, 2012, Fitch affirmed its AAA long-term and F1+ short-term sovereign credit rating on the U.S. government. The outlook remains negative. Moody's also rates the U.S. government AAA with a negative outlook. All three rating agencies have indicated that they will continue to assess fiscal projections and consolidation measures, as well as the medium-term economic outlook for the U.S.

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Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

Merrill Lynch defines market risk as the potential change in value of financial instruments caused by fluctuations in interest rates, exchange rates, equity and commodity prices, credit spreads, and related risks.

Control and Governance Structure

On January 1, 2009, pursuant to the acquisition of Merrill Lynch by Bank of America, Merrill Lynch adopted Bank of America's risk management and governance practices to maintain consistent risk measurement and disciplined risk taking. Bank of America's risk management structure as applicable to Merrill Lynch is described below.

The Global Markets Risk Committee (“~~GRC~~GMRC”), chaired by the Global Markets Risk Executive, has been designated by the Asset, Liability and Market Risk Committee (“ALMRC”) as the primary governance authority for global markets risk management including trading risk management. The ~~GRC~~GMRC's focus is to take a forward-looking view of the primary credit and market risks impacting Bank of America's Global ~~Banking and~~ Markets business (which includes Merrill Lynch's sales and trading businesses) and prioritize those that need a proactive risk mitigation strategy. Market risks that impact businesses outside of the Global ~~Banking and~~ Markets business are monitored and governed by their respective governance authorities.

The ~~GRC~~GMRC monitors significant daily revenues and losses by business and the primary drivers of the revenues or losses. Thresholds are in place for each of our businesses in order to determine if the revenue or loss is considered to be significant for that business. If any of the thresholds are exceeded, an explanation of the variance is provided to the ~~GRC~~GMRC. The thresholds are developed in coordination with the respective risk managers to highlight those revenues or losses that exceed what is considered to be normal daily income statement volatility.

Value-at-Risk (“VaR”)

To evaluate risk in our trading activities, we focus on the actual and potential volatility of individual positions as well as portfolios. VaR is a key statistic used to measure market risk. In order to manage day-to-day risks, VaR is subject to trading limits both for our overall trading portfolio and within individual businesses. All trading limit excesses are communicated to management for review.

A VaR model simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the ~~worst~~ loss the portfolio is expected to experience ~~based~~within ~~on historical trends with~~ a given ~~level of~~ confidence ~~and~~level ~~depends~~based on ~~the~~historical ~~volatility of the positions in the portfolio and on how strongly their risks are correlated~~data. With ~~Within~~ any VaR model, there are significant and numerous assumptions that will differ from company to company. In addition, the accuracy of a VaR model depends on the availability and quality of historical data for each of the positions in the portfolio. A VaR model may require additional modeling assumptions for new products that do not have extensive historical price data or for illiquid positions for which accurate daily prices are not consistently available.

A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios. There are, however, many limitations inherent in a VaR model as it utilizes historical results over a defined time period to estimate future performance. Historical results may not always be indicative of future results and changes in market conditions or in the composition of the underlying portfolio could have a material impact on the accuracy of the VaR model. In order for the VaR model to reflect current market conditions, we update the historical data underlying our VaR model on a bi-weekly basis and regularly review the assumptions underlying the model. Our VaR model utilizes three years of historical data. This time period was chosen to ensure that ~~the~~ VaR reflects both a broad range of market movements as well as being sensitive to recent changes in market volatility. In addition, certain types of risks associated with positions that are illiquid and/or unobservable are not included in VaR. If these risks are determined to be material, the VaR model results will be supplemented.

We continually review, evaluate and enhance our VaR model toso ~~ensure~~ that it reflects the material risks in our trading portfolio. ~~Nevertheless,~~Changes ~~due~~ to the ~~limitations previously discussed, we have historically used the~~ VaR model asare ~~only~~reviewed ~~one~~and ofapproved ~~the~~prior ~~components~~to inimplementation ~~managing our trading risk~~ and ~~also~~any ~~use~~material ~~other~~changes ~~techniques such as stress~~

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are reported to management through the appropriate governance committees. Nevertheless, due to the limitations previously discussed, we have historically used the VaR model as only one of the components in managing our trading risk and also use other techniques such as stress testing and desk level limits. Periods of extreme market stress influence the reliability of these techniques to various degrees.

The accompanying table presents year-end, average, high and low daily trading VaR for the year ended December 31, ~~2011~~2012, as well as a comparison to the year-end and average VaR asfor ofthe year ended December 31, ~~2010~~2011.

~~2011~~2012 Trading Activities Market Risk VaR

(dollars in millions)
	2011Year End			2011QuarterlyAverage(3)			2011High		2011Low		2010Year End
	2012Year End			2012QuarterlyAverage(3)			2012High		2012Low		2011Year End			2011 Quarterly Average (4)
Trading value-at-risk(1)
Foreign exchange	$	1423		$	1520		$	2324	$	1014	$	1814		$	15
Interest rate	3943			4038			4843		3133		3739			40
Credit	5688			~~102~~49			~~132~~88		5627		~~128~~56			102
Real estate/mortgage	32			64			90		32		69
Real estate / mortgage	16			27			36		16		32			64
Commodities	1413			1813			2816		1410		1914			18
Equities	1819			3320			4324		1816		3018			33
Subtotal(2)	~~173~~202			~~272~~167							~~301~~173			272
Diversification benefit	(93102		)	(~~130~~99		)					(~~127~~93		)	(130		)
Overall	$	80100		$	~~142~~68						$	~~174~~80		$	142


(1)	Based on a 99% confidence level and a one-day holding period.


(2)	Subtotals are not provided for highs and lows as they are not meaningful.

(3) Amounts represent the average of the quarter-end VaR results for ~~2011~~2012.

~~The~~(4) ~~decrease~~Amounts inrepresent the average ~~VaR~~of ~~during 2011 was primarily due to risk reductions during~~ the ~~year~~quarter-end ~~across~~VaR ~~the~~results ~~major~~for ~~asset classes~~2011.

The decrease in average VaR for 2012 was driven by reduced risk across most asset classes, with the largest reductions coming from the Credit, Real estate / mortgage and Equities asset classes. In addition, volatile market data from 2008, which was a material contribution to the 2011 average VaR, was no longer included in the three-year historical data for the 2012 average VaR.

Credit Risk Management

Counterparty Credit Risk

Credit risk is the risk of loss arising from the inability or failure of a borrower or counterparty to meet its obligations. Credit risk can also arise from operational failures that result in an erroneous advance, commitment or investment of funds. Merrill Lynch defines the credit exposure to a borrower or counterparty as the loss potential arising from all product classifications, including loans, derivatives, assets held-for-sale and unfunded lending commitments, which include loan commitments, letters of credit and financial guarantees. Derivative positions are recorded at fair value and assets held-for-sale are recorded at either the lower of cost or fair value. Certain loans and unfunded commitments are accounted for under the fair value option ~~election~~. Credit risk for these categories of assets is not accounted for as part of the allowance for credit losses but as part of the fair value adjustments recorded in earnings. For derivative positions, our credit risk is measured as the net cost in the event the counterparties with contracts in which we are in a gain position ~~to us~~ fail to perform under the terms of those contracts. We use the current mark-to-market value to represent credit exposure without giving consideration to future mark-to-market changes. The credit risk amounts take into consideration the effects of legally enforceable master netting agreements and ~~cash collateral. Our consumer and commercial credit extension and review procedures take into account funded and unfunded credit exposures.~~

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cash collateral. Our consumer and commercial credit extension and review procedures take into account funded and unfunded credit exposures.

We manage credit risk based on the risk profile of the borrower or counterparty, repayment sources, the nature of underlying collateral, and other support given current events, conditions and expectations. We classify our portfolios as either consumer or commercial and monitor credit risk in each as discussed below.

Commercial Portfolio

Credit risk management for the commercial portfolio begins with an assessment of the credit risk profile of the borrower or counterparty based on an analysis of its financial position. As part of the overall credit risk assessment, our commercial credit exposures are assigned a risk rating and are subject to approval based on defined credit approval standards. Subsequent to loan origination, risk ratings are monitored on an ongoing basis, and if necessary, adjusted to reflect changes in the financial condition, cash flow, risk profile or outlook of a borrower or counterparty. In making credit decisions, we consider risk rating, collateral, country, industry and single name concentration limits while also balancing the total borrower or counterparty relationship. Our business and risk management personnel use a variety of tools to continuously monitor the ability of a borrower or counterparty to perform under its obligations. We use risk rating aggregations to measure and evaluate concentrations within portfolios. In addition, risk ratings are a factor in determining the level of assigned economic capital and the allowance for credit losses.

Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure do not result in undesirable levels of risk. We review, measure and manage concentrations of credit exposure by industry, product, geography, customer relationship and loan size. We also review, measure and manage commercial real estate loans by geographic location and property type. In addition, within our international portfolio, we evaluate exposures by region and by country. We also utilize syndications of exposure to third parties, loan sales, hedging and other risk mitigation techniques to manage the size and risk profile of the commercial credit portfolio.

We account for certain large corporate loans and loan commitments, (including issued but unfunded letters of credit which are considered utilized for credit risk management purposes), that exceed our single name credit risk concentration guidelines under the fair value option. Lending commitments, both funded and unfunded, are actively managed and monitored, and as appropriate, credit risk for these lending relationships may be mitigated through the use of credit derivatives, with our credit view and market perspectives determining the size and timing of the hedging activity. In addition, we purchase credit protection to cover the funded portion as well as the unfunded portion of certain other credit exposures. To lessen the cost of obtaining our desired credit protection levels, credit exposure may be added within an industry, borrower or counterparty group by selling protection. These credit derivatives do not meet the requirements for treatment as accounting hedges. They are carried at fair value with changes in fair value recorded in earnings.

Consumer Portfolio

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower's credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience. These models are a component of our consumer credit risk management process and are used in part to help make both new and existing credit decisions, ~~and~~as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, determination of the allowance for loan losses, and economic capital allocations for credit risk.

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European Exposures

Certain European countries, including Greece, Ireland, Italy, Portugal and Spain, ~~continue~~have toexperienced ~~experience~~ varying degrees of financial stress in recent years. Risks from the ~~continued~~ongoing debt crisis in ~~Europe~~these countries could continue to disrupt the financial markets, which could have a detrimental impact on global economic conditions and sovereign and non-sovereign debt in these countries. ~~Uncertainty~~In in the ~~progress~~fourth quarter of ~~debt~~2012, ~~restructuring~~European ~~negotiations~~policymakers ~~and~~continued ~~the~~to ~~lack~~make ofincremental aprogress ~~clear~~toward ~~resolution~~greater tofiscal ~~the~~and ~~crisis~~monetary ~~has~~unity; ~~led~~however, tofundamental ~~continued~~issues ~~volatility~~of incompetitiveness, ~~European~~growth asand ~~well~~fiscal assolvency ~~global~~remain ~~financial~~as ~~markets~~challenges. In ~~December~~As ~~2011~~a result, ~~the~~volatility ~~ECB~~is ~~announced~~expected ~~initiatives~~ to ~~address~~continue. ~~European~~We ~~bank~~expect ~~liquidity~~to ~~and~~continue ~~funding~~to ~~concerns~~support byclient ~~providing~~activities ~~low-cost,~~in ~~three-year~~the ~~loans~~region toand ~~banks,~~our ~~and~~exposures ~~expanding~~may ~~collateral~~vary ~~eligibility. In~~over ~~early~~time ~~2012,~~as ~~S&P,~~we ~~Fitch~~monitor the situation and ~~Moody's~~manage our risk profile.

49The table below presents our direct sovereign and non-sovereign exposures in these countries at December 31, 2012. Our total sovereign and non-sovereign exposure to these countries was $2.9 billion at December 31, 2012 compared with $2.7 billion at December 31, 2011. The total exposure to these countries, net of all hedges, was $1.5 billion at December 31, 2012 compared with $1.1 billion at December 31, 2011. The fair value of hedges and credit default protection purchased, net of credit default protection sold, was $1.4 billion and $1.6 billion at December 31, 2012 and December 31, 2011, respectively.

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downgraded the credit ratings of several European countries, and S&P downgraded the credit rating of the EFSF, adding to concerns about investor appetite for continued support in stabilizing the affected countries.



Select European Countries
									Country		Hedges and			Net Country
	Funded Loans				Net				Exposure		Credit			Exposure
	and Loan		Unfunded		Counterparty		Securities/Other		December 31,		Default			December 31,
(dollars in millions)	Equivalents		Commitments		Exposure ⁽¹⁾		Investments ⁽²⁾		2012		Protection ⁽³⁾			2012 ⁽⁴⁾
Country

Greece
Sovereign	$	—	$	—	$	—	$	2	$	2	$	—		$	2
Financial Institutions	—		—		—		—		—		(23		)	(23		)
Corporates	—		—		1		52		53		(2		)	51
Total Greece	$	—	$	—	$	1	$	54	$	55	$	(25	)	$	30

Ireland
Sovereign	$	12	$	—	$	27	$	—	$	39	$	(10	)	$	29
Financial Institutions	19		12		55		15		101		(9		)	92
Corporates	—		—		6		37		43		(9		)	34
Total Ireland	$	31	$	12	$	88	$	52	$	183	$	(28	)	$	155

Italy

Sovereign	$	—	$	—	$	558	$	350	$	908	$	(724	)	$	184
Financial Institutions	—		—		180		342		522		(36		)	486
Corporates	—		—		243		160		403		(239		)	164
Total Italy	$	—	$	—	$	981	$	852	$	1,833	$	(999	)	$	834

Portugal

Sovereign	$	—	$	—	$	31	$	27	$	58	$	(26	)	$	32
Financial Institutions	—		—		1		24		25		(1		)	24
Corporates	—		—		4		85		89		(138		)	(49		)
Total Portugal	$	—	$	—	$	36	$	136	$	172	$	(165	)	$	7

Spain

Sovereign	$	—	$	—	$	64	$	144	$	208	$	(61	)	$	147
Financial Institutions	1		—		64		83		148		(29		)	119
Corporates	30		21		46		175		272		(59		)	213
Total Spain	$	31	$	21	$	174	$	402	$	628	$	(149	)	$	479

Total

Sovereign	$	12	$	—	$	680	$	523	$	1,215	$	(821	)	$	394
Financial Institutions	20		12		300		464		796		(98		)	698
Corporates	30		21		300		509		860		(447		)	413
Total	$	62	$	33	$	1,280	$	1,496	$	2,871	$	(1,366	)	$	1,505

~~The~~(1)Net ~~table~~counterparty ~~below~~exposure ~~presents~~includes ~~our~~the ~~direct~~fair ~~sovereign~~value ~~and~~of ~~non-sovereign~~derivatives ~~exposures~~including inthe ~~these~~counterparty ~~countries~~risk atassociated ~~December~~with ~~31,~~credit ~~2011~~default protection and secured financing transactions. Derivatives have been reduced by all eligible

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Select European Countries
									Country		Hedges and			Net Country
	Funded Loans								Exposure		Credit			Exposure
	and Loan		Unfunded		Derivative		Securities/Other		December 31,		Default			December 31,
(dollars in millions)	Equivalents		Commitments		Assets (1)		Investments (2)		2011		Protection (3)			2011 (4)
Country
Greece
Sovereign	$	—	$	—	$	—	$	101	$	101	$	43		$	144
Financial Institutions	—		—		1		—		1		(23		)	(22		)
Corporates	—		—		1		23		24		(1		)	23
Total Greece	$	—	$	—	$	2	$	124	$	126	$	19		$	145
Ireland
Sovereign	$	—	$	—	$	8	$	—	$	8	$	—		$	8
Financial Institutions	46		—		108		16		170		(11		)	159
Corporates	—		9		11		29		49		(9		)	40
Total Ireland	$	46	$	9	$	127	$	45	$	227	$	(20	)	$	207
Italy
Sovereign	$	—	$	—	$	650	$	20	$	670	$	(947	)	$	(277	)
Financial Institutions	3		—		109		117		229		(89		)	140
Corporates	67		—		243		185		495		(198		)	297
Total Italy	$	70	$	—	$	1,002	$	322	$	1,394	$	(1,234	)	$	160
Portugal
Sovereign	$	—	$	—	$	41	$	1	$	42	$	(29	)	$	13
Financial Institutions	—		—		2		4		6		(17		)	(11		)
Corporates	—		—		21		116		137		(138		)	(1		)
Total Portugal	$	—	$	—	$	64	$	121	$	185	$	(184	)	$	1
Spain
Sovereign	$	—	$	—	$	70	$	1	$	71	$	(97	)	$	(26	)
Financial Institutions	6		—		47		453		506		(64		)	442
Corporates	—		—		42		189		231		(41		)	190
Total Spain	$	6	$	—	$	159	$	643	$	808	$	(202	)	$	606
Total
Sovereign	$	—	$	—	$	769	$	123	$	892	$	(1,030	)	$	(138	)
Financial Institutions	55		—		267		590		912		(204		)	708
Corporates	67		9		318		542		936		(387		)	549
Total	$	122	$	9	$	1,354	$	1,255	$	2,740	$	(1,621	)	$	1,119

collateral pledged under legally enforceable netting agreements. Secured financing transactions have been reduced by eligible cash or securities pledged. The notional amount of reverse repurchase transactions was $1.3 billion at December 31, 2012. Counterparty exposure is not presented net of hedges or credit default protection.

(12)~~Derivative~~Long ~~assets~~securities ~~are~~exposures ~~carried at fair value and~~ have been ~~reduced~~netted byon ~~the~~a ~~amount~~single-name ofbasis ~~cash collateral applied of $945 million at December 31~~to, ~~2011.~~but Atnot ~~December 31~~below, ~~2011,~~zero ~~there~~by ~~was~~hedges ~~$59~~and ~~million~~short ~~of other marketable securities collateralizing derivative assets~~positions.

51(3)Represents credit default protection purchased, net of credit default protection sold, which is used to mitigate our risk to country exposures as listed, including $(463) million in net credit default protection purchased to hedge loans and securities and short positions, and $(903) million in additional credit default protection purchased to hedge derivative assets. Amounts are calculated based on the credit default protection notional amount assuming zero recovery adjusted for any fair value receivable or payable.

(4)Represents country exposure less hedges and credit default protection.

We hedge certain of our selected European country exposure with credit default swaps (“CDS”). The majority of our CDS contracts on reference assets in Greece, Ireland, Italy, Portugal and Spain are with highly-rated financial institutions primarily outside of the Eurozone and we work to limit or eliminate correlated CDS. Due to our engagement in market-making activities, our CDS portfolio contains contracts with various maturities to a diverse set of counterparties. We work to limit mismatches in maturities between our exposures and the CDS we use to hedge them. However, there may be instances where the protection purchased has a different maturity from the exposure for which the protection was purchased, in which case, those exposures and hedges are subject to more active monitoring and management.

The table below presents the notional and fair value amounts of single-name CDS purchased and sold on reference assets in Greece, Ireland, Italy, Portugal and Spain at December 31, 2012.



Single-Name CDS with Reference Assets in Greece, Ireland, Italy, Portugal and Spain⁽¹⁾
	Notional				Fair Value
(dollars in millions)	Purchased		Sold		Purchased		Sold
Greece
Aggregate	$	76	$	51	$	5	$	5
After Legally Netting ⁽²⁾	39		14		1		1

Ireland
Aggregate	1,090		889		128		77
After Legally Netting ⁽²⁾	1,041		841		122		75

Italy
Aggregate	10,460		7,333		1,240		634
After Legally Netting ⁽²⁾	6,165		3,037		988		392

Portugal
Aggregate	1,017		758		67		49
After Legally Netting ⁽²⁾	370		111		34		9

Spain
Aggregate	2,002		2,243		110		139
After Legally Netting ⁽²⁾	821		1,062		47		73

(1) The majority of our CDS contracts on reference assets in Greece, Ireland, Italy, Portugal and Spain are primarily with non-Eurozone counterparties.

(2) Amounts listed are after consideration of legally enforceable counterparty master netting agreements.

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~~(2)Includes~~Losses ~~$369~~could ~~million~~result even if there is credit default protection purchased because the purchased credit protection contracts only pay out under certain scenarios and thus not all losses may be covered by the credit protection contracts. The effectiveness of ~~reverse~~our ~~repurchase~~CDS ~~agreements~~protection as a hedge of these risks is influenced by a number of factors,~~which~~ ~~are~~including ~~presented~~the ~~based~~contractual onterms of the ~~domicile~~CDS. Generally, only the occurrence of a credit event as defined by the ~~counterparty~~CDS ~~consistent~~terms ~~with~~(which ~~Federal~~may ~~Financial~~include, ~~Institutions~~among ~~Examination~~other ~~Council~~events, ~~reporting~~the ~~requirements.~~failure ~~Cross-border~~to ~~resale~~pay ~~agreements where~~by, or restructuring of, the ~~underlying~~reference ~~collateral~~entity) isresults ~~U.S.~~in ~~Treasury~~a ~~Securities~~payment ~~are~~under ~~excluded~~the ~~from~~purchased ~~this~~credit ~~presentation~~protection contracts. ~~Securities~~The ~~exposures~~determination ~~are~~as ~~reduced~~to whether a credit event has occurred is made by ~~hedges~~the ~~and~~relevant ~~short~~ISDA ~~positions~~Determination Committee (comprised of various ISDA member firms) based on athe ~~single~~terms ~~name~~of ~~basis~~the toCDS and facts and circumstances for the event. Accordingly, ~~but~~uncertainties exist as to whether any particular strategy or policy action for addressing the European debt crisis would constitute a credit event under the CDS. A voluntary restructuring may not ~~less~~trigger ~~than~~a $0credit event under CDS terms and consequently may not trigger a payment under the CDS contract.

~~(3)Represents~~In addition to our direct sovereign and non-sovereign exposures, a significant deterioration of the ~~fair~~European debt crisis could result in material reductions in the value of ~~credit~~sovereign ~~default~~debt ~~protection~~and ~~purchased,~~other ~~including~~asset ~~($979)~~classes, ~~million~~disruptions in ~~net~~capital markets, widening of credit ~~default~~spreads ~~protection~~of U.S. and other ~~short~~financial ~~positions~~institutions, ~~and~~loss ~~($642)~~of ~~million~~investor confidence in the financial services industry, a slowdown in global economic activity and other adverse developments. For additional ~~credit~~information ~~default~~on ~~protection~~the todebt ~~hedge~~crisis ~~derivative~~in ~~assets~~Europe, see Item 1A. "Risk Factors".

(4)Represents country exposure less the fair value of hedges and credit default protection.

We hedge certain of our selected European country exposure with credit default swaps (“CDS”). The majority of our CDS contracts are with highly-rated financial institutions primarily outside of the Eurozone and we work to limit or eliminate correlated CDS. Due to our engagement in market-making activities, our CDS portfolio contains contracts with various maturities to a diverse set of counterparties.

In addition to our direct sovereign and non-sovereign exposures, a significant deterioration of the European debt crisis could result in material reductions in the value of sovereign debt and other asset classes, disruptions in capital markets, widening of credit spreads, loss of investor confidence in the financial services industry, a slowdown in global economic activity and other adverse developments. For additional information on the debt crisis in Europe, see Item 1A. "Risk Factors".

Losses could still result even if there is credit default protection purchased because the purchased credit protection contracts only pay out under certain scenarios and thus not all losses may be covered by the credit protection contracts. The effectiveness of our CDS protection as a hedge of these risks is influenced by a number of factors, including the contractual terms of the CDS. Generally, only the occurrence of a credit event as defined by the CDS terms (which may include, among other events, the failure to pay by, or restructuring of, the reference entity) results in a payment under the purchased credit protection contracts. The determination as to whether a credit event has occurred is made by the relevant International Swaps and Derivatives Association, Inc. ("ISDA") Determination Committee (comprised of various ISDA member firms) based on the terms of the CDS and facts and circumstances for the event. Accordingly, uncertainties exist as to whether any particular strategy or policy action for addressing the European debt crisis would constitute a credit event under the CDS. A voluntary restructuring may not trigger a credit event under CDS terms and consequently may not trigger a payment under the CDS contract.

Derivatives

We enter into ISDA master netting agreements or their equivalent (“master netting agreements”) with almost all of our derivative counterparties. Master netting agreements provide protection in bankruptcy in certain circumstances and, inwhere ~~some~~legally ~~cases~~enforceable, enable receivables and payables with the same counterparty to be offset for accounting and risk management purposes. Netting ~~Master netting~~ agreements are generally negotiated bilaterally and can require complex terms. While we make reasonable efforts to execute such agreements, it is possible that a counterparty may be unwilling to sign such an agreement and, as a result, would subject us to additional credit risk. The enforceability of master netting agreements under bankruptcy laws in certain countries or in certain industries is not free from doubt, and receivables and payables with counterparties in these countries or industries are accordingly recorded on a gross basis.

To reduce the risk of loss, we require collateral, principally cash and U.S. government and agency securities, on certain derivative transactions. From an economic standpoint, we evaluate risk exposures net of related collateral that meets specified standards. In addition to obtaining collateral, we attempt to mitigate counterparty default risk on derivatives whenever possible by entering into transactions with provisions that enable us to terminate or reset the terms of our derivative contracts.

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Item 8.	Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of Merrill Lynch & Co., Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings (loss) ~~earnings~~, comprehensive (loss) income, changes in stockholder's equity and cash flows present fairly, in all material respects, the financial position of Merrill Lynch & Co., Inc. and its subsidiaries (the "Company") at December 31, ~~2011~~2012 and December 31, ~~2010~~2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2011~~2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2011~~2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers ~~LLC~~LLP

New York, New York

February 2328, ~~2012~~2013

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Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Statements of (Loss) Earnings
Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Statements of Earnings (Loss)
	For the Year Ended			For the Year Ended			For the Year Ended
(dollars in millions)	December 31, ~~2011~~2012			December 31, ~~2010~~2011			December 31, ~~2009~~2010
Revenues
Principal transactions	$	52,~~928~~306		$	75,~~074~~876		$	57,~~121~~092
Commissions	5,~~698~~079			5,~~760~~698			65,~~008~~760
Managed account and other fee-based revenues	5,~~203~~427			45,~~516~~203			4,~~317~~516
Investment banking	54,~~179~~914			5,~~313~~179			5,~~558~~313
Earnings from equity method investments	~~347~~285			~~898~~347			~~1,679~~898
Intercompany service fee revenue from BAC	925			279			200
Intercompany service fee revenue from Bank of America	986			944			329
Other revenues	1,~~855~~929			41,~~496~~808			34,~~622~~473
Other-than-temporary impairment losses on available-for-sale debt securities:
Total other-than-temporary impairment losses on AFS debt securities	(69		)	(174		)	(660		)
Total other-than-temporary impairment losses	(6		)	(69		)	(174		)
Less: Portion of other-than-temporary impairment losses recognized in
OCI on AFS debt securities	10			2			4
other comprehensive income	—			10			2
Subtotal	2520,~~076~~920			2824,~~164~~996			2528,~~849~~209
Interest and dividend revenues	86,~~003~~395			98,~~303~~186			159,~~476~~352
Less interest expense	87,~~785~~098			98,~~621~~785			129,~~041~~610
Net interest (expense) income	(782		)	(318		)	3,435
Net interest expense	(703		)	(599		)	(258		)
Revenues, net of interest expense	2420,~~294~~217			2724,~~846~~397			2927,~~284~~951
Non-interest expenses
Compensation and benefits	1514,~~773~~608			15,~~069~~773			1315,~~333~~069
Communications and technology	1,~~771~~588			1,~~993~~771			21,~~015~~993
Occupancy and related depreciation	1,~~367~~204			1,~~395~~367			1,~~316~~395
Brokerage, clearing, and exchange fees	~~1,121~~951			1,~~022~~121			1,~~087~~022
Advertising and market development	~~500~~501			~~444~~500			~~396~~444
Professional fees	~~1,029~~921			~~986~~1,029			~~769~~986
Office supplies and postage	~~126~~104			~~157~~126			~~173~~157
Provision for representations and warranties	2,731			(120		)	(235		)
Representations and warranties	(754		)	2,731			(120		)
Intercompany service fee expense from BAC	2,320			538			573
Intercompany service fee expense from Bank of America	1,798			2,320			538
Other	21,~~250~~554			2,~~439~~250			12,~~868~~439
Total non-interest expenses	2822,~~988~~475			2328,~~923~~988			2123,~~295~~923
Pre-tax (loss) earnings	(42,~~694~~258		)	3(4,~~923~~591		)	74,~~989~~028
Income tax (benefit) expense	(2,~~946~~548		)	~~147~~(2,944		)	~~649~~148
Net (loss) earnings	$	(1,748	)	$	3,776		$	7,340
Net earnings (loss)	$	290		$	(1,647	)	$	3,880
Preferred stock dividends	—			~~134~~—			~~153~~134
Net (loss) earnings applicable to common stockholder	$	(1,748	)	$	3,642		$	7,187
Net earnings (loss) applicable to common stockholder	$	290		$	(1,647	)	$	3,746

See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Statements of Changes in Comprehensive (Loss) Income
Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Statements of Comprehensive (Loss) Income
	For the Year Ended			For the Year Ended			For the Year Ended
(dollars in millions)	December 31, ~~2011~~2012			December 31, ~~2010~~2011			December 31, ~~2009~~2010
Net (Loss) Earnings	$	(1,748	)	$	3,776		$	7,340
Net earnings (loss)	$	290		$	(1,647	)	$	3,880
Other comprehensive income (loss):
Other comprehensive (loss) income:
Foreign currency translation adjustment:
Foreign currency translation gains (losses)	50			(197		)	(597		)
Foreign currency translation (losses) gains	(26		)	50			(197		)
Income tax (expense) benefit	(166		)	240			691
Income tax benefit (expense)	49			(166		)	240
Total	~~(116~~23		)	43(116		)	9443
Net unrealized gains (losses) oninvestment securities available-for-sale:
Net unrealized holding gains (losses) arising during the period	57—			~~(168~~57		)	91(168		)
Reclassification adjustment for realized (gains) losses included in net (loss) earnings	(3—		)	9(3		)	149
Net unrealized gains (losses) on investment securities available-for-sale	54—			~~(159~~54		)	~~105~~(159		)
Income tax (expense) benefit	(21		)	46			(58		)
Income tax benefit (expense)	30			(21		)	46
Total	3330			~~(113~~33		)	47(113		)
Deferred (losses) gains on cash flow hedges:
Deferred (losses) gains on cash flow hedges	(3—		)	32(3		)	7232
Reclassification adjustment for realized gains included in net (loss) earnings	(6—		)	(256		)	(7125		)
Income tax benefit (expense)	4—			(34		)	(13		)
Total	(5—		)	4(5		)	—4
Defined benefit pension and postretirement plans:
Net actuarial gains (losses)	111			(56		)	(417		)
Net actuarial (losses) gains	(537		)	111			(56		)
Prior service credit (cost)	243			~~(59~~24		)	—(59		)
Income tax (expense) benefit	(28		)	39			164
Income tax benefit (expense)	189			(28		)	39
Total	~~107~~(345		)	~~(76~~107		)	(~~253~~76		)
Total other comprehensive income (loss)	19			(142		)	(112		)
Total other comprehensive (loss) income	(292		)	19			(142		)
Comprehensive (Loss) Income	$	(1,729	)	$	3,634		$	7,228
Comprehensive (loss) income	$	(2	)	$	(1,628	)	$	3,738

See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Balance Sheets
(dollars in millions)	December 31, 2011		December 31, 2010
(dollars in millions, except per share amounts)	December 31, 2012		December 31, 2011
ASSETS
Cash and cash equivalents	$	1312,~~731~~911	$	1713,~~220~~733
Cash and securities segregated for regulatory purposes or deposited with clearing organizations	1114,~~757~~031		1211,~~424~~757
Securities financing transactions
Receivables under resale agreements (includes $85,652 in 2011 and $74,255 in 2010 measured at fair value in accordance with the fair value option election)	143,491		138,219
Receivables under resale agreements (includes $93,715 in 2012 and $85,652 in 2011 measured at fair value in accordance with the fair value option election)	148,817		143,491
Receivables under securities borrowed transactions (includes $259 in 2011 and $1,672 in 2010 measured at fair value in accordance with the fair value option election)	58,109		60,458
Receivables under securities borrowed transactions (includes $961 in 2012 and $259 in 2011 measured at fair value in accordance with the fair value option election)	60,992		58,109
	201,600		198,677
	209,809		201,600
Trading assets, at fair value (includes securities pledged as collateral that can be sold or repledged of $34,932 in 2011 and $33,933 in 2010):
Trading assets, at fair value (includes securities pledged as collateral that can be sold or repledged of $36,268 in 2012 and $34,932 in 2011)
Derivative contracts	3524,~~013~~851		3935,~~371~~091
Equities and convertible debentures	2540,~~619~~618		3425,~~204~~619
Non-U.S. governments and agencies	3037,~~239~~845		2230,~~248~~239
Corporate debt and preferred stock	1718,~~305~~337		2717,~~703~~305
Mortgages, mortgage-backed, and asset-backed	810,~~254~~613		108,~~994~~254
U.S. Government and agencies	4354,~~003~~564		4143,~~378~~003
Municipals, money markets, physical commodities and other	1312,~~044~~480		1413,~~759~~044
	172,477		190,657
	199,308		172,555
Investment securities (includes $244 in 2011 and $310 in 2010 measured at fair value in accordance with the fair value option election)	6,684		17,769
Investment securities (includes $162 in 2012 and $244 in 2011 measured at fair value in accordance with the fair value option election)	5,903		6,684
Securities received as collateral, at fair value	1316,~~716~~013		2013,~~363~~716
Receivables from Bank of America	5045,~~972~~830		6059,~~655~~945
Other receivables
Customers (net of allowance for doubtful accounts of $15 in 2011 and $8 in 2010)	20,512		22,080
Customers (net of allowance for doubtful accounts of $9 in 2012 and $15 in 2011) (includes $271 in 2012 and $0 in 2011 measured at fair value in accordance with the fair value option election)	20,265		20,512
Brokers and dealers	821,~~691~~792		168,~~483~~691
Interest and other	9,~~130~~244		109,~~633~~130
	38,333		49,196
	51,301		38,333
Loans, notes, and mortgages (net of allowances for loan losses of $72 in 2011 and $170 in 2010) (includes $2,322 in 2011 and $3,190 in 2010 measured at fair value in accordance with the fair value option election)	20,574		25,803
Loans, notes, and mortgages (net of allowances for loan losses of $57 in 2012 and $72 in 2011) (includes $3,077 in 2012 and $2,322 in 2011 measured at fair value in accordance with the fair value option election)	19,545		20,574
Equipment and facilities, net	1,~~385~~031		1,~~712~~385
Goodwill and intangible assets	9,~~404~~782		910,~~714~~079
Other assets	1517,~~155~~464		1715,~~436~~155
Total Assets	$	~~555~~602,~~788~~928	$	~~621~~565,~~626~~516
Assets of Consolidated VIEs Included in Total Assets Above (pledged as collateral)
Assets of Consolidated VIEs Included in Total Assets Above (isolated to settle the liabilities of the VIEs)
Trading assets, excluding derivative contracts	$	87,~~800~~847	$	108,~~838~~800
Derivative contracts	—		41
Investment securities	41		162
Investment securities	162		309
Loans, notes, and mortgages (net)	206		94
Loans, notes, and mortgages (net)	94		221
Other assets	764		3,022
Other assets	3,022		1,597
Total Assets of Consolidated VIEs	$	8,858	$	12,078
Total Assets of Consolidated VIEs	$	12,078	$	13,006
See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Balance Sheets
(dollars in millions)	December 31, 2011			December 31, 2010
(dollars in millions, except per share amounts)	December 31, 2012			December 31, 2011
LIABILITIES
Securities financing transactions
Payables under repurchase agreements (includes $34,235 in 2011 and 37,394 in 2010 measured at fair value in accordance with the fair value option election)	$	173,767		$	183,758
Payables under repurchase agreements (includes $42,639 in 2012 and $34,235 in 2011 measured at fair value in accordance with the fair value option election)	$	219,710		$	173,767
Payables under securities loaned transactions	1118,~~460~~305			1511,~~251~~460
	185,227			199,009
	238,015			185,227
Short-term borrowings (includes $5,908 in 2011 and $6,472 in 2010 measured at fair value in accordance with the fair value option election)	6,051			15,248
Short-term borrowings (includes $3,283 in 2012 and $5,908 in 2011 measured at fair value in accordance with the fair value option election)	3,376			6,051
Deposits	12,~~364~~873			12,~~826~~364
Trading liabilities, at fair value
Derivative contracts	2620,~~239~~568			3226,~~197~~239
Equities and convertible debentures	1218,~~223~~957			1412,~~026~~223
Non-U.S. governments and agencies	1619,~~554~~707			1516,~~705~~554
Corporate debt and preferred stock	78,~~084~~026			97,~~500~~084
U.S. Government and agencies	1620,~~976~~186			2416,~~747~~976
Municipals, money markets and other	~~645~~562			~~571~~645
	79,721			96,746
	88,006			79,721
Obligation to return securities received as collateral, at fair value	1316,~~716~~013			2013,~~363~~716
Payables to Bank of America	318,~~779~~752			2331,~~021~~731
Other payables
Customers	4052,~~153~~053			3940,~~045~~153
Brokers and dealers	84,~~667~~748			128,~~895~~667
Interest and other (includes $173 in 2011 and $165 in 2010 measured at fair value in accordance with the fair value option election)	18,099			19,900
Interest and other (includes $57 in 2012 and $173 in 2011 measured at fair value in accordance with the fair value option election)	18,634			18,128
	66,919			71,840
	75,435			66,948
Long-term borrowings (includes $30,325 in 2011 and $39,214 in 2010 measured at fair value in accordance with the fair value option election)	107,118			128,851
Long-term borrowings (includes $30,875 in 2012 and $30,325 in 2011 measured at fair value in accordance with the fair value option election)	92,249			106,929
Junior subordinated notes (related to trust preferred securities)	3,~~600~~809			3,~~576~~789
Total Liabilities	~~506~~538,~~495~~528			~~571~~506,~~480~~476
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock (par value $1.331/3 per share; authorized: 3,000,000,000 shares; issued: 2011 and 2010 — 1,000 shares)	—			—
Common stock (par value $1.331/3 per share; authorized: 3,000,000,000 shares; issued: 2012 and 2011 — 1,000 shares)	—			—
Paid-in capital	4156,~~292~~127			4050,~~416~~765
Accumulated other comprehensive loss (net of tax)	(~~235~~527		)	(~~254~~235		)
Retained earnings	8,~~236~~800			98,~~984~~510
Total Stockholder's Equity	4964,~~293~~400			5059,~~146~~040
Total Liabilities and Stockholder's Equity	$	~~555~~602,~~788~~928		$	~~621~~565,~~626~~516
Liabilities of Consolidated VIEs Included in Total Liabilities Above
Short-term borrowings	$	4,939		$	4,642
Short-term borrowings (includes $81 in 2012 and $0 in 2011 of non-recourse debt)	$	2,940		$	4,939
Derivative contracts	419			14
Payables to Bank of America	—1,157			2—
Other payables	186			53
Long-term borrowings (includes $2,335 in 2012 and $2,579 in 2011 of non-recourse debt)	6,292			6,595
Long-term borrowings	6,595			6,674
Other payables	14			186
Total Liabilities of Consolidated VIEs	$	1110,~~724~~422		$	11,~~372~~724

See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co. Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity
(dollars in millions)	Preferred Stock			Common Stock			Additional Paid-in-Capital			RetainedEarnings			AccumulatedOtherComprehensive(Loss) Income			~~Treasury Stock, at Cost~~TotalStockholder'sEquity			~~TotalStockholder'sEquity~~
Balance December 31, 2008	$	8,605		$	2,709		$	47,232		$	(8,756	)	$	(6,318	)	$	(23,622	)	$	19,850
Balance December 31, 2009	$	1,541		$	—		$	48,214		$	6,556		$	(112	)	$	56,199
Effect of BAC acquisition	(7,064		)	(2,709		)	—			8,756			6,318			23,622			28,923
Mandatory conversion of preferred stock	(1,541		)	—			—			—			—			(1,541		)
Effect of purchase accounting adjustments	—			—			(19,669		)	—			—			—			(19,669		)
Capital contribution associated with stock-based compensation awards	—			—			1,447			—			—			1,447
Cash capital contribution from BAC	—			—			6,850			—			—			—			6,850
Other capital contributions from Bank of America	—			—			228			—			—			228
BAC contribution of BASH	—			—			3,677			—			—			—			3,677
Foreign currency translation adjustment	—			—			—			—			43			43
BAC contribution of BAI	—			—			263			—			—			—			263
Net unrealized losses on investment securities available-for-sale	—			—			—			—			(113		)	(113		)
Capital contribution associated with stock-based compensation awards	—			—			388			—			—			—			388
Net deferred gains on cash flow hedges	—			—			—			—			4			4
Foreign currency translation adjustment	—			—			—			—			94			—			94
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			(76		)	(76		)
Net unrealized gains on investment securities available-for-sale	—			—			—			—			47			—			47
Cumulative adjustments for accounting changes:
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			(253		)	—			(253		)
Consolidation of certain variable interest entities	—			—			—			(145		)	—			(145		)
Net earnings	—			—			—			73,~~340~~880			—			—3,880			~~7,340~~
Preferred stock dividends declared	—			—			—			(~~153~~134		)	—			—(134		)	~~(153~~		)
Cash dividends paid to BAC	—			—			—			(700		)	—			—			(700		)
Balance December 31, 2010	—			—			49,889			10,157			(254		)	59,792
Balance December 31, 2009	1,541			—			38,741			6,487			(112		)	—			46,657
Capital contribution associated with stock-based compensation awards	—			—			876			—			—			876
Mandatory conversion of preferred stock	(1,541		)	—			—			—			—			—			(1,541		)
Foreign currency translation adjustment	—			—			—			—			(116		)	(116		)
Capital contribution associated with stock-based compensation awards	—			—			1,447			—			—			—			1,447
Net unrealized gains on investment securities available-for-sale	—			—			—			—			33			33
Other capital contributions from BAC	—			—			228			—			—			—			228
Net deferred losses on cash flow hedges	—			—			—			—			(5		)	(5		)
Foreign currency translation adjustment	—			—			—			—			43			—			43
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			107			107
Net unrealized losses on investment securities available-for-sale	—			—			—			—			(113		)	—			(113		)
Net loss	—			—			—			(1,647		)	—			(1,647		)
Net deferred gains on cash flow hedges	—			—			—			—			4			—			4
Balance December 31, 2011	—			—			50,765			8,510			(235		)	59,040
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			(76		)	—			(76		)
Capital contribution associated with stock-based compensation awards	—			—			1,131			—			—			1,131
Cumulative adjustments for accounting changes:
Capital contributions from Bank of America associated with intragroup reorganizations and other transactions	—			—			4,231			—			—			4,231
Consolidation of certain variable interest entities	—			—			—			(145		)	—			—			(145		)
Foreign currency translation adjustment	—			—			—			—			23			23
Net earnings	—			—			—			3,776			—			—			3,776
Net unrealized gains on investment securities available-for-sale	—			—			—			—			30			30
Preferred stock dividends declared	—			—			—			(134		)	—			—			(134		)
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			(345		)	(345		)
Balance December 31, 2010	—			—			40,416			9,984			(254		)	—			50,146
Net earnings	—			—			—			290			—			290
Capital contribution associated with stock-based compensation awards	—			—			876			—			—			—			876
Balance December 31, 2012	$	—		$	—		$	56,127		$	8,800		$	(527	)	$	64,400
Foreign currency translation adjustment	—			—			—			—			(116		)	—			(116		)
Net unrealized gains on investment securities available-for-sale	—			—			—			—			33			—			33
Net deferred losses on cash flow hedges	—			—			—			—			(5		)	—			(5		)
Change in funded status of defined benefit pension and post retirement plans	—			—			—			—			107			—			107
Net loss	—			—			—			(1,748		)	—			—			(1,748		)
Balance December 31, 2011	$	—		$	—		$	41,292		$	8,236		$	(235	)	$	—		$	49,293

See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co., Inc. and SubsidiariesConsolidated Statements of Cash Flows
	For the Year Ended			For the Year Ended			For the Year Ended
(dollars in millions)	December 31, ~~2011~~2012			December 31, ~~2010~~2011			December 31, ~~2009~~2010
Cash flows from operating activities:
Net (loss) earnings	$	(1,748	)	$	3,776		$	7,340
Net earnings (loss)	$	290		$	(1,647	)	$	3,880
Adjustments to reconcile net (loss) earnings to cash provided by operating activities
Adjustments to reconcile net earnings (loss) to cash provided by operating activities
Provision for representations and warranties	2,731			(120		)	(235		)
Representations and warranties	(754		)	2,731			(120		)
Depreciation and amortization	~~731~~576			~~900~~731			~~1,080~~900
Share-based compensation expense	1,~~919~~531			1,~~483~~919			1,~~433~~483
Deferred taxes	3,081			637			578
Gains on repurchases of long-term borrowings	(405		)	—			—
Earnings from equity method investments	(347		)	(625		)	(1,443		)
Fair value adjustments on structured notes	3,207			(2,030		)	31
Other	2,033			(159		)	(167		)
Deferred taxes	(2,785		)	3,081			637
Earnings from equity method investments	(265		)	(347		)	(625		)
Other	498			2,033			(159		)
Changes in operating assets and liabilities:
Trading assets	16(26,~~580~~565		)	716,~~778~~528			337,~~683~~758
Cash and securities segregated for regulatory purposes or deposited with clearing organizations	~~667~~(2,274		)	~~2,506~~667			52,~~679~~506
Receivables from Bank of America	918,~~683~~346			69,~~999~~612			~~(96~~5,~~132~~657		)
Receivables under resale agreements	(5,~~272~~326		)	(375,~~956~~272		)	99(37,~~304~~956		)
Receivables under securities borrowed transactions	(2,~~349~~883		)	172,~~590~~349			(217,~~050~~590		)
Customer receivables	~~1,561~~247			121,~~205~~561			112,~~944~~205
Brokers and dealers receivables	7(13,~~794~~103		)	(37,~~226~~794		)	5(3,~~180~~226		)
Proceeds from loans, notes, and mortgages held for sale	41,~~455~~079			84,~~456~~455			98,~~237~~456
Other changes in loans, notes, and mortgages held for sale	(~~2,465~~662		)	(42,~~652~~465		)	(74,~~212~~713		)
Trading liabilities	~~(17~~8,~~061~~184		)	11(17,~~561~~061		)	~~(21~~11,~~246~~561		)
Payables under repurchase agreements	(945,~~991~~943		)	(19,~~989~~991		)	(511,~~977~~989		)
Payables under securities loaned transactions	(36,~~791~~845		)	(103,~~314~~791		)	(910,~~577~~314		)
Payables to Bank of America	8(22,~~758~~979		)	(98,~~440~~787		)	32(8,~~461~~155		)
Customer payables	111,~~108~~900			(1,~~413~~108		)	(71,~~569~~413		)
Brokers and dealers payables	(43,~~228~~919		)	(64,~~008~~228		)	1(6,~~245~~008		)
Other, net	(41,~~659~~056		)	7(2,~~030~~636		)	27,~~834~~034
Cash provided by operating activities	1317,~~888~~782			513,~~019~~888			45,~~390~~020
Cash flows from investing activities:
Proceeds from (payments for):
Maturities of available-for-sale securities	1,734			1,615			6,989
Paydowns and maturities of available-for-sale securities	1,214			1,734			1,615
Sales of available-for-sale securities	~~4,290~~22			154,~~472~~290			1115,~~311~~472
Purchases of available-for-sale securities	(1,~~672~~236		)	(51,~~136~~672		)	(15,~~902~~136		)
Sales and maturities of held-to-maturity securities	~~250~~—			—250			—
Equipment and facilities, net	(95		)	(377		)	(264		)
Sale of office buildings	578			—			—
Loans, notes, and mortgages held for investment	2,793			6,927			3,440
Equipment and facilities, net	(266		)	(95		)	(377		)
Sale of MLBT-FSB to Bank of America	—			—			4,450
Loans, notes, and mortgages held for investment	1,010			2,793			6,927
Other investments	61,~~169~~600			116,~~787~~169			411,~~000~~787
Cash provided by investing activities	132,~~469~~922			3013,~~288~~469			2830,~~024~~288
Cash flows from financing activities:
Proceeds from (payments for):
Commercial paper and short-term borrowings	(9,197		)	(4,623		)	(33,229		)
Short-term borrowings	(2,675		)	(9,197		)	(4,623		)
Issuance and resale of long-term borrowings	97,~~169~~518			89,~~553~~169			78,~~555~~553
Settlement and repurchases of long-term borrowings	(2926,~~876~~975		)	(3429,~~914~~876		)	(5634,~~008~~914		)
Capital contributions from Bank of America	—			—			6,850
Deposits	509			(462		)	(2,361		)
Deposits	(462		)	(2,361		)	8,088
Derivative financing transactions	101			36			(1		)
Derivative financing transactions	36			(1		)	19
Dividends	—			—			(134		)
Other common stock transactions	—			—			(81		)
Cash used for financing activities	(21,522		)	(30,330		)	(33,480		)
Dividends	—			(134		)	(853		)
Effect of exchange rate changes on cash and cash equivalents	(4		)	(516		)	251
Cash used for financing activities	(30,330		)	(33,480		)	(67,659		)
(Decrease) increase in cash and cash equivalents	(822		)	(3,489		)	2,079
Effect of exchange rate changes on cash and cash equivalents	(516		)	251			269
Cash and cash equivalents, beginning of period	13,733			17,222			15,143
(Decrease) increase in cash and cash equivalents	(3,489		)	2,078			(34,976		)
Cash and cash equivalents, end of period	$	12,911		$	13,733		$	17,222
Cash and cash equivalents, beginning of period	17,220			15,142			50,118
Cash and cash equivalents, end of period	$	13,731		$	17,220		$	15,142
Supplemental Disclosure of Cash Flow Information:
Income taxes paid	$	~~428~~448		$	~~2,577~~428		$	~~808~~2,577
Income taxes refunded	(2,047		)	(4,232		)	(315		)
Income taxes refunded(1)	(4,753		)	(2,047		)	(4,232		)
Interest paid	76,~~399~~355			7,~~846~~399			117,~~115~~846

⁽¹⁾ Included in income taxes refunded are amounts received from Bank of America that represent payments for utilization of Merrill Lynch's net tax deductions in the consolidated Bank of America tax returns in accordance with the intercompany tax allocation policy.

Non-cash investing and financing activities:

For the ~~year~~years ended December 31, 2012 and 2010, Merrill Lynch received a non-cash capital ~~contribution~~contributions of approximately $1.1 billion and $1.0 billion, respectively, from Bank of America associated with certain employee stock compensation awards. In addition, as of January 1, 2010, Merrill Lynch assumed assets and liabilities in connection with the consolidation of certain VIEs. See Note 9. In October 2010, Merrill Lynch’s mandatory convertible preferred stock was automatically converted to Bank of America common stock. The redemption was settled through a non-cash intercompany transaction.

InEffective ~~connection~~on ~~with~~January 1, ~~the~~2009, ~~acquisition of~~ Merrill Lynch byacquired ~~Bank~~the ofnet ~~America,~~assets ~~Merrill~~of ~~Lynch~~two ~~recorded~~affiliates ~~purchase~~and ~~accounting~~their ~~adjustments~~respective insubsidiaries ~~the~~from ~~year~~Bank ~~ended~~of ~~December 31,~~America. This ~~2009,~~was ~~which were~~ recorded as a non-cash capital ~~contributions~~contribution. See Note 1. In addition, ~~during~~effective on January 1, 2009, Bank of America contributed the net assets of ~~Banc~~Bank of America ~~Investment~~Securities ~~Services,~~Holdings ~~Inc.~~Corporation to Merrill Lynch. ~~See Note 2.~~

Effective on January 1, 2009, Bank of America contributed the net assets of Bank of America Securities Holdings Corporation totaling approximately $3.7 billion to Merrill Lynch. This was recorded as a non-cash capital contribution. See Note 1.

In connection with the sale of Merrill Lynch Bank USA to a subsidiary of Bank of America during 2009, Merrill Lynch received a note receivable as consideration for the net book value of the assets and liabilities transferred to Bank of America. See Note 2.

See Notes to Consolidated Financial Statements.

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Merrill Lynch & Co., Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2011~~2012



Note 1.	Summary of Significant Accounting Policies

Description of Business

Merrill Lynch & Co. Inc. (“ML & Co.”) and, together with its subsidiaries (“Merrill Lynch”), provides investment, financing and other related services to individuals and institutions on a global basis through its broker, dealer, banking and other financial services subsidiaries. On January 1, 2009, MLMerrill &Lynch ~~Co.~~ was acquired by, ~~Bank of America Corporation ("Bank of America") in exchange for common~~ and ~~preferred~~became ~~stock with~~ a ~~value of $29.1 billion. ML & Co. is a~~ wholly-owned subsidiary of, Bank of America Corporation (“Bank of America”).

Its principal subsidiaries include:


•	Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a U.S.-based broker-dealer in securities and futures commission merchant;


•	Merrill Lynch International (“MLI”), a United Kingdom (“U.K.”)-based regulated investment firm;


•	Merrill Lynch Capital Services, Inc., a U.S.-based dealer in interest rate, currency, commodity and credit derivatives;


•	Merrill Lynch International Bank Limited (“MLIB”), an Ireland-based bank;


•	Merrill Lynch Japan Securities Co., Ltd. (“MLJS”), a Japan-based broker-dealer; and


•	Merrill Lynch Derivative Products, AG, a Switzerland-based derivatives dealer.

Services provided to clients by Merrill Lynch and other activities include:


•	Securities brokerage, trading and underwriting;


•	Investment banking, advisory services (including mergers and acquisitions) and other corporate finance activities;


•	Wealth management products and services, including financial, retirement and generational planning;


•	Investment management and advisory and related record-keeping services;


•	Origination, brokerage, dealer, and related activities in swaps, options, forwards, exchange-traded futures, other derivatives, commodities and foreign exchange products;


•	Securities clearance, settlement financing services and prime brokerage; and


•	Research services on a global basis.

~~Bank~~Intragroup ~~of America Acquisition~~Reorganization

On ~~January~~ November 1, ~~2009~~2012, ~~Merrill~~in ~~Lynch~~connection ~~was~~with ~~acquired~~an byintragroup reorganization involving Bank of America ~~through~~and ~~the~~a ~~merger~~number of aits ~~wholly-owned~~subsidiaries, ~~subsidiary~~Merrill ofLynch ~~Bank~~acquired oftwo ~~America~~affiliated ~~with~~companies and ~~into~~their ~~ML &~~respective ~~Co.~~subsidiaries ~~with~~from ~~ML &~~Bank Coof America. ~~continuing~~The asacquisition ~~the~~was ~~surviving~~effected ~~corporation~~through ~~and~~ a ~~wholly~~non-~~owned~~cash ~~subsidiary~~capital ofcontribution from Bank of America. ~~Upon~~In ~~completion~~accordance ofwith ~~the~~Accounting ~~acquisition,~~Standards ~~each~~Codification ~~outstanding~~(“ASC”) ~~share~~805, ofBusiness ~~ML &~~Combinations ~~Co.~~(“Business ~~common~~Combinations ~~stock~~Accounting”), ~~was~~the ~~converted~~Consolidated ~~into~~Financial ~~0.8595 shares~~Statements ofinclude ~~Bank~~the ofhistorical ~~America~~results ~~common stock. As~~ of the ~~completion~~acquired ofaffiliated ~~the~~companies ~~acquisition,~~and ~~ML &~~their ~~Co.~~subsidiaries ~~Series 1~~as ~~through~~if ~~Series 8~~the ~~preferred~~transaction ~~stock~~had ~~were~~occurred ~~converted~~on ~~into~~January ~~Bank~~1, of2009, ~~America~~the ~~preferred~~date ~~stock~~at ~~with~~which ~~substantially~~all ~~identical terms to~~ the ~~corresponding~~affected ~~series~~entities ofwere ~~Merrill~~first ~~Lynch~~under ~~preferred~~the ~~stock~~common ~~(except~~control ~~for~~of ~~additional voting rights provided to the~~ Bank of America ~~securities)~~. ~~The~~ Merrill Lynch ~~9.00%~~has ~~Mandatory~~recorded ~~Convertible~~the ~~Non-Cumulative~~assets ~~Preferred~~and ~~Stock,~~liabilities ~~Series 2,~~acquired ~~and~~in ~~9.00%~~connection ~~Mandatory~~with ~~Convertible~~the ~~Non-Cumulative~~transaction ~~Preferred~~at ~~Stock,~~their ~~Series 3~~historical ~~that~~carrying ~~remained~~values, ~~issued~~which ~~and~~resulted ~~outstanding~~in ~~subsequent~~increases to ~~the~~stockholder's ~~completion~~equity ofand ~~the~~receivables ~~acquisition~~from ~~were automatically converted into~~ Bank of America ~~common~~of ~~stock~~approximately on$13.5 ~~October 15~~billion, ~~2010~~$9.1 inbillion ~~accordance~~and ~~with~~$9.0 ~~the~~billion ~~terms~~as of ~~these~~December ~~securities~~31, ~~(see~~2012, ~~Note 13)~~2011 and 2010, respectively.

Merger with Banc of America Securities Holdings Corporation (“BASH”)

On November 1, 2010, ML & Co. merged with BASH, a wholly-owned subsidiary of Bank of America, with ML &

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Co. as the surviving corporation in the merger (the “BASH Merger”). In accordance with Accounting Standards Codification (“ASC”) 805-10, Business Combinations (“Business Combinations Accounting”), the Consolidated Financial Statements of Merrill Lynch include the historical results of BASH and subsidiaries as if the BASH Merger had occurred on January 1, 2009, the date at which both entities were first under the common control of Bank of America. Merrill Lynch has recorded the assets and liabilities acquired in connection with the BASH Merger at their historical carrying values.

As a result of the BASH Merger, Banc of America Securities LLC (“BAS”), a wholly-owned broker-dealer subsidiary of BASH, became a wholly-owned broker-dealer subsidiary of ML & Co. Subsequently, on November 1, 2010, BAS was merged into MLPF&S, a wholly-owned broker-dealer subsidiary of ML & Co., with MLPF&S as the surviving corporation in the merger. As a result, MLPF&S remained a direct wholly-owned broker-dealer subsidiary of ML & Co. and an indirect wholly-owned broker-dealer subsidiary of Bank of America.

Basis of Presentation

The Consolidated Financial Statements include the accounts of Merrill Lynch. The Consolidated Financial Statements are presented in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Intercompany transactions and balances within Merrill Lynch have been eliminated. Transactions and balances with ~~Bank of America have not been eliminated. Certain prior-period amounts have been reclassified in order to conform with the current year's presentation.~~

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Bank of America have not been eliminated. Certain prior-period amounts have been reclassified in order to conform to the current period presentation.

The Consolidated Financial Statements are presented in U.S. dollars. Many non-U.S. subsidiaries have a functional currency (i.e., the currency in which activities are primarily conducted) that is other than the U.S. dollar, often the currency of the country in which a subsidiary is domiciled. Subsidiaries’ assets and liabilities are translated to U.S. dollars at year-end exchange rates, while revenues and expenses are translated at average exchange rates during the year. Adjustments that result from translating amounts in a subsidiary’s functional currency and related hedging, net of related tax effects, are reported in stockholder's equity as a component of accumulated other comprehensive (loss) income. All other translation adjustments are included in earnings. Merrill Lynch uses derivatives to manage the currency exposure arising from activities in non-U.S. subsidiaries. See the Derivatives section for additional information on accounting for derivatives.

Merrill Lynch offers a broad array of products and services to its diverse client base of individuals, small to mid-size businesses, employee benefit plans, corporations, financial institutions, and governments around the world. These products and services are offered from a number of locations globally. In some cases, the same or similar products and services may be offered to both individual and institutional clients, utilizing the same infrastructure. In other cases, a single infrastructure may be used to support multiple products and services offered to clients. When Merrill Lynch analyzes its profitability, it does not focus on the profitability of a single product or service. Instead, Merrill Lynch views the profitability of businesses offering an array of products and services to various types of clients. The profitability of the products and services offered to individuals, small to mid-size businesses, and employee benefit plans is analyzed separately from the profitability of products and services offered to corporations, financial institutions, and governments, regardless of whether there is commonality in products and services infrastructure. As such, Merrill Lynch does not separately disclose the costs associated with the products and services sold or general and administrative costs either in total or by product.

When determining the prices for products and services, Merrill Lynch considers multiple factors, including prices being offered in the market for similar products and services, the competitiveness of its pricing compared to competitors, the profitability of its businesses and its overall profitability, as well as the profitability, creditworthiness, and importance of the overall client relationships. Shared expenses that are incurred to support products and services and infrastructures are allocated to the businesses based on various methodologies, which may include headcount, square footage, and certain other criteria. Similarly, certain revenues may be shared based upon agreed methodologies. When evaluating the profitability of various businesses, Merrill Lynch considers all expenses incurred, including overhead and the costs of shared services, as all are considered integral to the operation of the businesses.

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Consolidation Accounting

Merrill Lynch determines whether it is required to consolidate an entity by first evaluating whether the entity qualifies as a voting rights entity (“VRE”) or as a variable interest entity (“VIE”).

The Consolidated Financial Statements include the accounts of Merrill Lynch, whose subsidiaries are generally controlled through a majority voting interest or a controlling financial interest. On January 1, 2010, Merrill Lynch adopted accounting guidance on consolidation of VIEs, which has been deferred for certain investment funds managed on behalf of third parties if Merrill Lynch does not have an obligation to fund losses that could potentially be significant to these funds. Any funds meeting the deferral requirements will continue to be evaluated for consolidation in accordance with the prior guidance.

VREs — VREs are defined to include entities that have both equity at risk that is sufficient to fund future operations and have equity investors that have a controlling financial interest in the entity through their equity investments. In accordance with ASC 810, Consolidation (“Consolidation Accounting”), Merrill Lynch generally consolidates those VREs where it has the majority of the voting rights. For investments in limited partnerships and certain limited liability corporations that Merrill Lynch does not control, Merrill Lynch applies ASC 323, Investments — Equity Method and Joint Ventures (“Equity Method Accounting”), which requires use of the equity method of accounting for investors that have more than a minor influence, which is typically defined as an investment of greater than 3% to 5% of the outstanding equity in the entity. For more traditional corporate structures, in accordance with Equity Method Accounting, Merrill Lynch applies the equity method of accounting where it has significant influence over the investee. Significant influence can be evidenced by a significant ownership interest (which is generally defined as a voting interest of 20% to 50%), significant board of director representation, or other contracts and arrangements.

VIEs — Those entities that do not meet the VRE criteria are generally analyzed for consolidation as VIEs. A VIE is an entity that lacks equity investors or whose equity investors do not have a controlling financial interest in the entity through their equity investments. Merrill Lynch consolidates those VIEs for which it is the primary beneficiary. In accordance with Consolidation Accounting guidance, Merrill Lynch is considered the primary beneficiary when it has a controlling financial interest in a VIE. Merrill Lynch has a controlling financial interest when it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Merrill Lynch reassesses whether it is the primary beneficiary of a VIE on a quarterly basis. The quarterly58

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structures, in accordance with Equity Method Accounting, Merrill Lynch applies the equity method of accounting where it has significant influence over the investee. Significant influence can be evidenced by a significant ownership interest (which is generally defined as a voting interest of 20% to 50%), significant board of director representation, or other contracts and arrangements.

VIEs — Those entities that do not meet the VRE criteria are generally analyzed for consolidation as VIEs. A VIE is an entity that lacks equity investors or whose equity investors do not have a controlling financial interest in the entity through their equity investments. Merrill Lynch consolidates those VIEs for which it is the primary beneficiary. In accordance with Consolidation Accounting, Merrill Lynch is considered to be the primary beneficiary when it has a controlling financial interest in a VIE. Merrill Lynch has a controlling financial interest when it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Merrill Lynch reassesses whether it is the primary beneficiary of a VIE on a quarterly basis. The quarterly

reassessment process considers whether Merrill Lynch has acquired or divested the power to direct the activities of the VIE through changes in governing documents or other circumstances. The reassessment also considers whether Merrill Lynch has acquired or disposed of a financial interest that could be significant to the VIE, or whether an interest in the VIE has become significant or is no longer significant. The consolidation status of the VIEs with which Merrill Lynch is involved may change as a result of such reassessments.

Securitization Activities

In the normal course of business, Merrill Lynch has securitized commercial and residential mortgage loans; municipal, government, and corporate bonds; and other types of financial assets. Merrill Lynch may retain interests in the securitized financial assets by holding notes or other debt instruments issued by the securitization vehicle. In accordance with ASC 860, Transfers and Servicing (“Financial Transfers and Servicing Accounting”), Merrill Lynch recognizes transfers of financial assets where it relinquishes control as sales to the extent of cash and any other proceeds received.

Revenue Recognition

Principal transactions revenue includes both realized and unrealized gains and losses on trading assets and trading liabilities, investment securities classified as trading investments and fair value changes associated with certain structured debt. These instruments are recorded at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Gains and losses on sales are recognized on a trade date basis.

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Commissions revenues include commissions, mutual fund distribution fees and contingent deferred sales charge revenue, which are all accrued as earned. Commissions revenues also include mutual fund redemption fees, which are recognized at the time of redemption. Commissions revenues earned from certain customer equity transactions are recorded net of related brokerage, clearing and exchange fees.

Managed account and other fee-based revenues primarily consist of asset-priced portfolio service fees earned from the administration of separately managed accounts and other investment accounts for retail investors, annual account fees, and certain other account-related fees.

Investment banking revenues ~~include~~includes ~~underwriting~~fees ~~revenues~~for the underwriting and ~~fees~~distribution ~~for~~of ~~merger~~debt, equity and ~~acquisition~~loan products and ~~other~~fees for advisory services and tailored risk management solutions, which are accrued when services for the transactions are substantially completed. ~~Underwriting revenues are presented net of transaction-related expenses.~~

Earnings from equity method investments include Merrill Lynch’s pro rata share of income and losses associated with investments accounted for under the equity method of accounting.

Other revenues include gains (losses) on investment securities, including sales of available-for-sale securities, gains (losses) on private equity investments and other principal investments and gains (losses) on loans and other miscellaneous items.

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Contractual interest received and paid, and dividends received on trading assets and trading liabilities, excluding derivatives, are recognized on an accrual basis as a component of interest and dividend revenues and interest expense. Interest and dividends on investment securities are recognized on an accrual basis as a component of interest and dividend revenues. Interest related to loans, notes, and mortgages, securities financing activities and certain short- and long-term borrowings are recorded on an accrual basis as interest revenue or interest expense, as applicable.

Use of Estimates

In presenting the Consolidated Financial Statements, management makes estimates including the following:


•	Valuations of assets and liabilities requiring fair value estimates;


•	The allowance for credit losses;


•	Determination of other-than-temporary impairments for available-for-sale investment securities;

• The outcome of pending litigation;


•	Determination of the liability for representations and warranties made in connection with the sales of residential mortgage and home equity loans;


•	Determination of whether VIEs should be consolidated;


•	The ability to realize deferred tax assets and the recognition and measurement of uncertain tax positions;


•	The carrying amount of goodwill and intangible assets;


•	The amortization period of intangible assets with definite lives;


•	Incentive-based compensation accruals and valuation of share-based payment compensation arrangements; and


•	Other matters that affect the reported amounts and disclosure of contingencies in the Consolidated Financial Statements.

Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on the Consolidated Financial Statements, and it is possible that such changes could occur in the near term. A discussion of certain areas in which estimates are a significant component of the amounts reported in the Consolidated Financial Statements follows:

Fair Value Measurement

Merrill Lynch accounts for a significant portion of its financial instruments at fair value or considers fair value in their measurement. Merrill Lynch accounts for certain financial assets and liabilities at fair value under various accounting literature, including ASC 320, Investments — Debt and Equity Securities (“Investment Accounting”), ASC 815, Derivatives and Hedging (“Derivatives Accounting”), and the fair value option election in accordance with ASC 825-10-25, Financial Instruments — Recognition (the “fair value option election”). Merrill Lynch also accounts for certain assets at fair value under applicable industry guidance, namely ASC 940, Financial Services — Broker and Dealers (“Broker-Dealer Guide”) and ASC 946, Financial Services — Investment Companies (“Investment Company Guide”).

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ASC 815, Derivatives and Hedging (“Derivatives Accounting”), and the fair value option election in accordance with ASC 825-10-25, Financial Instruments — Recognition (the “fair value option election”). Merrill Lynch also accounts for certain assets at fair value under applicable industry guidance, namely ASC 940, Financial Services — Broker and Dealers (“Broker-Dealer Guide”) and ASC 946, Financial Services — Investment Companies (“Investment Company Guide”).

ASC 820, Fair Value Measurements and Disclosures (“Fair Value Accounting”) defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements.

Fair values for over-the-counter (“OTC”) derivative financial instruments, principally forwards, options, and swaps, represent the present value of amounts estimated to be received from or paid to a marketplace participant in settlement of these instruments (i.e., the amount Merrill Lynch would expect to receive in a derivative asset assignment or would expect to pay to have a derivative liability assumed). These derivatives are valued using pricing models based on the net present value of estimated future cash flows and directly observed prices from exchange-traded derivatives, other OTC trades, or external pricing services, while taking into account the counterparty’s creditworthiness, or Merrill Lynch’s own creditworthiness, as appropriate. When external pricing services are used, the methods and assumptions used are reviewed by Merrill Lynch. Determining the fair value for OTC derivative contracts can require a significant level of estimation and management judgment.

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New and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation often incorporate significant estimates and assumptions that market participants would use in pricing the instrument, which may impact the results of operations reported in the Consolidated Financial Statements. For instance, on long-dated and illiquid contracts extrapolation methods are applied to observed market data in order to estimate inputs and assumptions that are not directly observable. This enables Merrill Lynch to mark to fair value all positions consistently when only a subset of prices are directly observable. Values for OTC derivatives are verified using observed information about the costs of hedging the risk and other trades in the market. As the markets for these products develop, Merrill Lynch continually refines its pricing models to correlate more closely to the market price of these instruments. The recognition of significant inception gains and losses that incorporate unobservable inputs is reviewed by management to ensure such gains and losses are derived from observable inputs and/or incorporate reasonable assumptions about the unobservable component, such as implied bid-offer adjustments.

Certain financial instruments recorded at fair value are initially measured using mid-market prices which results in gross long and short positions valued at the same pricing level prior to the application of position netting. The resulting net positions are then adjusted to fair value representing the exit price as defined in Fair Value Accounting. The significant adjustments include liquidity and counterparty credit risk.

Liquidity

Merrill Lynch makes adjustments to bring a position from a mid-market to a bid or offer price, depending upon the net open position. Merrill Lynch values net long positions at bid prices and net short positions at offer prices. These adjustments are based upon either observable or implied bid-offer prices.

Counterparty Credit Risk

In determining the fair value of financial assets and financial liabilities, Merrill Lynch considers ~~both~~ the credit risk of its counterparties, as well as its own creditworthiness. Merrill Lynch attempts to mitigate credit risk to third parties by entering into netting and collateral arrangements. Net counterparty exposure (counterparty positions netted by offsetting transactions and both cash and securities collateral) is then valued for counterparty creditworthiness and ~~this~~the resultant ~~value~~credit valuation adjustment ("CVA") is incorporated into the fair value of the respective instruments. ~~Merrill Lynch generally calculates the credit risk adjustment for derivatives based on observable market credit spreads.~~

Fair Value Accounting also requires that Merrill Lynch consider its own creditworthiness when determining the fair value of certain instruments, including OTC derivative instruments (i.e., debit valuation adjustments or "DVA") and certain structured notes carried at fair value under the fair value option election (i.~~e.,~~ ~~debit~~Merrill ~~valuation~~Lynch’s ~~adjustment~~DVA oris ~~"DVA")~~measured in the same manner as CVA. The impact of Merrill Lynch’s DVA is ~~measured~~incorporated into the fair value of OTC derivative contracts even when credit risk is not readily observable in the instrument. For additional information on calculating CVA and DVA see Note 6.

64Legal and Representations and Warranty Reserves

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the same manner as third party counterparty credit risk. The impact of Merrill Lynch’s DVA is incorporated into the fair value of instruments such as OTC derivative contracts even when credit risk is not readily observable in the instrument. OTC derivative liabilities are valued based on the net counterparty exposure as described above.

Legal and Representation and Warranty Reserves

Merrill Lynch is a party in various actions, some of which involve claims for substantial amounts. Amounts are accrued for the financial resolution of claims that have either been asserted or are deemed probable of assertion if, in the opinion of management, it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In many cases, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no accrual is made until that time. Accruals are subject to significant estimation by management, with input from any outside counsel handling the matter.

In addition, Merrill Lynch and certain of its subsidiaries made various representations and warranties in connection with the sale of residential mortgage and home equity loans. Breaches of these representations and warranties may result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies. Refer to Note 14 for further information.

~~Income Taxes~~61

Merrill Lynch provides for income taxes on all transactions that have been recognized in the Consolidated Financial Statements in accordance with ASC 740, Income Taxes (“Income Tax Accounting”). Accordingly, deferred taxes are adjusted to reflect the tax rates at which future taxable amounts will likely be settled or realized. The effects of tax rate changes on deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more-likely-than-not to be realized. Pursuant to Income Tax Accounting, Merrill Lynch may consider various sources of evidence in assessing the necessity of valuation allowances to reduce deferred tax assets to amounts more-likely-than-not to be realized, including the following: 1) past and projected earnings, including losses, of Merrill Lynch and Bank of America, as certain tax attributes such as U.S. net operating losses (“NOLs”), U.S. capital loss carryforwards and foreign tax credit carryforwards can be utilized by Bank of America in certain income tax returns, 2) tax carryforward periods, and 3) tax planning strategies and other factors of the legal entities, such as the intercompany tax-allocation policy. Included within Merrill Lynch’s net deferred tax assets are carryforward amounts generated in the U.S. and the U.K. that are deductible in the future as NOLs. Merrill Lynch has concluded that these deferred tax assets are more-likely-than-not to be fully utilized prior to expiration, based on the projected level of future taxable income of Merrill Lynch and Bank of America, which is relevant due to the intercompany tax-allocation policy. For this purpose, future taxable income was projected based on forecasts, historical earnings after adjusting for the past market disruptions and the anticipated impact of the differences between pre-tax earnings and taxable income.

Merrill Lynch recognizes and measures its unrecognized tax benefits in accordance with Income Tax Accounting. Merrill Lynch estimates the likelihood, based on their technical merits, that tax positions will be sustained upon examination considering the facts and circumstances and information available at the end of each period. Merrill Lynch adjusts the level of unrecognized tax benefits ("UTBs") when there is more information available, or when an event occurs requiring a change. In accordance with Bank of America’s policy, any new or subsequent change in an unrecognized tax benefit related to a Bank of America state consolidated, combined or unitary return in which Merrill Lynch is a member will generally not be reflected in Merrill Lynch’s balance sheet. However, upon Bank of America’s resolution of the item, any material impact determined to be attributable to Merrill Lynch will be reflected in Merrill Lynch’s balance sheet. Merrill Lynch accrues income-tax-related interest and penalties, if applicable, within income tax expense.

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~~consolidated~~Income group and the pro forma Merrill Lynch group. Under this policy, tax benefits associated with NOLs (or other tax attributes) of Merrill Lynch are payable to Merrill Lynch generally upon utilization in Bank of America’s tax returns. See Note 17 for further discussion of income taxes.Taxes

Merrill Lynch provides for income taxes on all transactions that have been recognized in the Consolidated Financial Statements in accordance with ASC 740, Income Taxes (“Income Tax Accounting”). Accordingly, deferred taxes are adjusted to reflect the tax rates at which future taxable amounts will likely be settled or realized. The effects of tax rate changes on deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more-likely-than-not to be realized. Pursuant to Income Tax Accounting, Merrill Lynch may consider various sources of evidence in assessing the necessity of valuation allowances to reduce deferred tax assets to amounts more-likely-than-not to be realized, including the following: 1) past and projected earnings, including losses, of Merrill Lynch and Bank of America, as certain tax attributes such as U.S. net operating losses (“NOLs”), U.S. capital loss carryforwards and foreign tax credit carryforwards can be utilized by Bank of America in certain income tax returns, 2) tax carryforward periods, and 3) tax planning strategies and other factors of the legal entities, such as the intercompany tax allocation policy. Included within Merrill Lynch’s net deferred tax assets are carryforward amounts generated in the U.S. and the U.K. that are deductible in the future as NOLs. Merrill Lynch has concluded that these deferred tax assets are more-likely-than-not to be fully utilized prior to expiration, based on the projected level of future taxable income of Merrill Lynch and Bank of America, which is relevant due to the intercompany tax allocation policy. For this purpose, future taxable income was projected based on forecasts, historical earnings after adjusting for the past market disruptions and the anticipated impact of the differences between pre-tax earnings and taxable income.

Merrill Lynch recognizes and measures its unrecognized tax benefits ("UTBs") in accordance with Income Tax Accounting. Merrill Lynch estimates the likelihood, based on their technical merits, that tax positions will be sustained upon examination considering the facts and circumstances and information available at the end of each period. Merrill Lynch adjusts the level of UTBs when there is more information available, or when an event occurs requiring a change. In accordance with Bank of America’s policy, any new or subsequent change in an unrecognized tax benefit related to a Bank of America state consolidated, combined or unitary return in which Merrill Lynch is a member will generally not be reflected in Merrill Lynch’s Consolidated Statement of Earnings (Loss) and Consolidated Balance Sheet. However, upon Bank of America’s resolution of the item, any material impact determined to be attributable to Merrill Lynch will be reflected in Merrill Lynch’s Consolidated Statement of Earnings (Loss) and Consolidated Balance Sheet. Merrill Lynch accrues income-tax-related interest and penalties, if applicable, within income tax expense.

Merrill Lynch’s results of operations are included in the U.S. federal income tax return and certain state income tax returns of Bank of America. The method of allocating income tax expense is determined under the intercompany tax allocation policy of Bank of America. This policy specifies that income tax expense will be computed for all Bank of America subsidiaries generally on a separate pro forma return basis, taking into account the tax position of the consolidated group and the pro forma Merrill Lynch group. Under this policy, tax benefits associated with NOLs (or other tax attributes) of Merrill Lynch are payable to Merrill Lynch generally upon utilization in Bank of America’s tax returns. See Note 17 for further discussion of income taxes.

Goodwill and Intangible Assets

Goodwill is the cost of an acquired company in excess of the fair value of identifiable net assets at the acquisition date. Goodwill is tested annually (or more frequently under certain conditions) for impairment at the reporting unit level in accordance with ASC 350, Intangibles — Goodwill and Other (“Goodwill and Intangible Assets Accounting”).

Intangible assets with definite lives consist primarily of value assigned to customer relationships. Intangible assets with definite lives are tested for impairment in accordance with ASC 360, Property, Plant, and Equipment, whenever certain conditions exist which would indicate the carrying amount of such assets may not be recoverable. Intangible assets with definitive lives are amortized over their respective estimated useful lives. Intangible assets with indefinite lives consist of value assigned to the Merrill Lynch brand and are tested for impairment in ~~accordance with Goodwill and Intangible Assets Accounting. Intangible assets with indefinite lives are not amortized.~~

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accordance with Goodwill and Intangible Assets Accounting. Intangible assets with indefinite lives are not amortized.

Merrill Lynch makes certain complex judgments with respect to its goodwill and intangible assets, including assumptions and estimates used to determine fair value. Merrill Lynch also makes assumptions and estimates in determining the useful lives of its intangible assets with definite lives. Refer to Note 11 for further information.

Balance Sheet

Cash and Cash Equivalents

Merrill Lynch defines cash equivalents as short-term, highly liquid securities, and interest-earning deposits with maturities, when purchased, of 90 days or less, that are not used for trading purposes. ~~The amounts recognized for cash and cash equivalents in the Consolidated Balance Sheets approximate fair value.~~

Cash and Securities Segregated for Regulatory Purposes or Deposited with Clearing Organizations

Merrill Lynch maintains relationships with clients around the world and, as a result, it is subject to various regulatory regimes. As a result of its client activities, Merrill Lynch is obligated by rules mandated by its primary regulators, including the Securities and Exchange Commission (“SEC”) and the ~~Commodities~~Commodity Futures Trading Commission (“CFTC”) in the U.S. and the Financial Services Authority (“FSA”) in the U.K. to segregate or set aside cash and/or qualified securities to satisfy these regulations, which have been promulgated to protect customer assets. In addition, Merrill Lynch is a member of various clearing organizations at which it maintains cash and/or securities required for the conduct of its day-to-day clearance activities. ~~The amounts recognized for cash and securities segregated for regulatory purposes or deposited with clearing organizations in the Consolidated Balance Sheets approximate fair value.~~

Securities Financing Transactions

Merrill Lynch enters into repurchase and resale agreements and securities borrowed and loaned transactions to accommodate customers and earn interest rate spreads (also referred to as “matched-book transactions”), obtain securities for settlement and finance inventory positions. Resale and repurchase agreements are generally accounted for as collateralized financing transactions and may be recorded at their contractual amounts plus accrued interest or at fair value under the fair value option election. In resale and repurchase agreements, typically the termination date of the agreements is before the maturity date of the underlying security. However, in certain situations, Merrill Lynch may enter into agreements where the termination date of the transaction is the same as the maturity date of the underlying security. These transactions are referred to as repo-to-maturity ("RTM") transactions. In accordance with applicable accounting guidance, Merrill Lynch accounts for RTM transactions as sales and purchases when the transferred securities are highly liquid. In instances where securities are considered sold or purchased, Merrill Lynch removes or recognizes the securities ~~from~~and, in the ~~Consolidated~~case ~~Balance~~of ~~Sheet~~sales, recognizes a gain or loss, where applicable. At December 31, 2012 and December 31, in2011, ~~the~~Merrill ~~case~~Lynch ofhad no outstanding RTM transactions that had been accounted for as sales, and an immaterial amount of transactions that had been accounted for as purchases.

66Resale and repurchase agreements recorded at fair value are generally valued based on pricing models that use inputs with observable levels of price transparency. Where the fair value option election has been made, changes in the fair value of resale and repurchase agreements are reflected in principal transactions revenues and the contractual interest coupon is recorde

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