.-- ..... BOARD OF GOVERNORS 

OF'THE 

FEDERAL RESERVE SYSTEM 

WASHINGTON, O. (. 20551 

Gregory A. Baer, Esq. 

Deputy General Counsel 

Regulatory & Public Policy 

Bank of America 

730 15th Street, N.W. 

Washington, D.C. 20005 

Dear Mr. Baer: 

ADDRESS OFFICIAL CORRESPONDENCE 

TO THE BOARD 

March 30, 2009 

This is in response to the request by Bank of America Corporation ("BAC"), 

Charlotte, North Carolina, for temporary relief from the Board's risk-based and 

leverage capital guidelines for bank holding companies ("Capital Rules")! in 

connection with its acquisition of Merrill Lynch & Company, Inc. ("Merrill Lynch"), 

New York, New York. 

BAC acquired a substantial amount of deferred tax assets ("DTAs") in the 

Merrill Lynch acquisition that are dependent on future taxable income. The Capital 

Rules limit the amount ofDTAs that a bank holding company may include in 

tier 1 capital to the lesser of (i) 10 percent of tier 1 capital or (ii) the amount ofDTAs 

that the bank holding company expects to realize within one year of the calendar 

quarter-end date based on projections of future taxable income for that year 

("look-forward period,,).2 BAC has requested approval to include in tier I capital the 

DTAs it acquired in the Merrill Lynch acquisition based on projections of future 

taxable income for a three-year look-forward period. The Board has broad authority 

to provide exemptions from the Capital Rules. 3 

The Board has concluded that granting BAC a limited expansion on the DTA 

look-forward period to three years for the fIrst year after its acquisition of Merrill 

1 12 CFR part 225, Appendices A and D. 

2 See 12 CFR part 225, Appendix A, § ILAA.a. 

3 See 12 CFR part 225, Appendix A, § lILA.; Appendix D, § II.b.; Appendix G, 

§ 1 (c). 
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Lynch and to two years for the second year, while maintaining a DTA ceiling of 

10 percent of tier 1 capital, would allow BAC to employ a substantial portion of the 

considerable amount ofDTAs generated by its acquisition of Merrill Lynch, which 

has experienced significant financial difficulties. At the same time, look-forward 

periods of two to three years provide reasonable certainty that BAC would obtain 

capital relief only for those DTAs that it would be able to use based on actual future 

earnings. Furthermore, granting BAC's request would be consistent with relief from 

the Capital Rules that the Board has previously granted to other banking organizations 

that have acquired institutions with financial difficulties.4 

In accordance with these determinations, the Board hereby grants BAC's 

request to include in tier 1 capital, from the consummation of its acquisition of Merrill 

Lynch until January 1,2010, an aggregate amount ofDTAs equal to the lesser of 

(i) 10 percent of tier 1 capital or (ii) the sum of (A) the amount ofDTAs acquired as a 

result of its acquisition of Merrill Lynch that BAC expects to realize within three 

years of the date of the end of the calendar quarter in which the acquisition was 

completed, based on projections of future taxable income for those three years, plus 

(B) the amount ofDTAs not related to Merrill Lynch that BAC expects to realize 

within one year of the date of the end of the calendar quarter in which the acquisition 

was completed, based on projections of future taxable income for that year. From 

January 1,2010, to January 1,2011, BAC may apply a look-forward period of two 

years, rather than three years, in the manner described above for DTAs acquired as a 

result of the Merrill Lynch acquisition. The temporary DTA relief will expire on 

January 1,2011. 

The economic valuation of DTAs is dependent on the existence of future 

earnings and their value as assets is based on projections of future earnings. In BAC's 

review of valuations of its DTAs and their inclusion in tier 1 capital, BAC has 

committed to value its DT As for purposes of calculating its capital ratios using the 

same projection and valuation methods and assumptions used to measure DTAs for 

generally accepted accounting purposes, subject to the same internal controls and 

external auditing reviews applied to those methods and assumptions. 

These determinations are specifically conditioned on compliance by BAC with 

all the commitments and representations made to the Board in connection with this 

request. These commitments and representations are deemed to be conditions 

imposed in writing by the Board in connection with granting the request and, as such, 

4 See Board letters to James S. Keller, Esq. (The PNC Financial Services Group, 

Inc.), December 22,2008; and Paul A. Ackerman (Wells Fargo & Company), 

February 20,2009. 
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may be enforced in proceedings under applicable law. These determinations are also 

based on the specific facts and circumstances of the existing relationship between 

BAC and Merrill Lynch. Any material change in those facts or circumstances or any 

failure by BAC to observe any of its commitments or representations may result in a 

different determination or in revocation of the exemptions. 

Sincerely yours, 

~deU'1~ 

Robert deY. Frierson 

Deputy Secretary of the Board 

cc: Federal Reserve Bank of Richmond 

Office of the Comptroller of the Currency