Item 1A. Risk Factors
  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.
   
 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 ratings agencies
could have a material adverse effect on our liquidity, cash flows, competitive position, financial
condition and results of operations by significantly limiting our access to the funding or capital
markets, increasing our borrowing costs, or triggering additional collateral or funding
requirements under certain bilateral provisions of our trading and collateralized financing
contracts.




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Our liquidity, cash flows, financial condition and results of operations, and competitive position
could be significantly adversely affected by the inability of ML & Co. or Bank of America to access
capital markets or if there is an increase in our borrowing costs.




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Our dependence upon funds from our subsidiaries and our parent could adversely impact our
liquidity.
 Mortgage and Housing Market-Related Risk
 We have been, and expect to continue to be, required to repurchase loans and/or reimburse whole
loan buyers, the government-sponsored enterprises (GSEs) and monoline bond insurance companies
(monolines) for losses due to claims related to representations and warranties made in connection
with sales of residential mortgage-backed securities and other loans, and have received similar
claims, and may receive additional claims, from private-label securitization investors. The
resolution of these claims could have a material adverse effect on our cash flows, financial
condition and results of operations.




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Continued, or increasing, declines in the domestic and international housing markets, including
home prices, may adversely affect our asset classes and 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 credit risk, due to economic or market disruptions, insufficient credit loss reserves or
concentration of credit risk, may necessitate increased provisions for credit losses and could have
an adverse effect on our financial condition and results of operations.




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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.
 Our derivatives businesses may expose us to unexpected risks and potential losses.
    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 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.




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Declines in the value of certain of our assets could have an adverse effect on our results of
operations.
    Our commodities activities, particularly our physical commodities business, subject us to
performance, environmental and other risks that may result in significant cost and liabilities.




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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, could require us to 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 or results of
operations.




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We face substantial potential legal liability and significant regulatory action, which could have
material adverse effects on our cash flows, financial condition and results of operations or cause
significant reputational harm to us.
 Changes in governmental fiscal and monetary policy could adversely affect our financial condition
and results of operations.
 Risk of the Competitive Environment in Which We Operate
 We face significant and increasing competition in the financial services industry.




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Damage to our reputation could significantly harm our businesses, including our competitive
position and business prospects.
    Our ability to attract and retain qualified employees is critical to the success of our businesses
and failure to do so could adversely affect our business prospects, including our competitive
position and results of operations.




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Our inability to adapt our products and services to evolving industry standards and consumer
preferences could harm our businesses.
 Risks Related to Risk Management
 Our risk management framework may not be effective in mitigating risk and reducing the potential
for significant losses.
 A failure in or breach of our operational or security systems or infrastructure, or those of third
parties, could disrupt our businesses, result in the disclosure of confidential information or
damage our reputation. Any such failure also could have a significant adverse effect on our
reputation, cash flows, financial condition and results of operations.




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Risk Related to Business Combination Transactions
 Any failure to successfully integrate with Bank of America could adversely affect our business.
 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.




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Risk from Accounting Changes
 Changes in accounting standards or inaccurate estimates or assumptions in the application of
accounting policies could adversely affect our financial condition and results of operations.
  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 Corporation and affected by Bank of Americas performance.