Bank of America Corporation: 10-K Risk Factor Changes

Liquidity is essential to our businesses and is primarily supported by globally sourced deposits in our bank entities, as well as secured and unsecured liabilities transacted in the capital markets. We rely on certain secured funding sources, such as repo markets, which are typically short-term and may be credit-sensitive. We also engage in asset securitization transactions, including with the government-sponsored 9 Bank of America 9 Bank of America 9 Bank of America 9 Bank of America enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainty regarding the impact of potential GSE privatization. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on credit lines or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the failure to attract or retain client deposits or invested funds, including large-scale deposit migration (e.g., from attrition resulting from clients seeking higher yielding deposits or to an alternative financial institution perceived to be safer, changing investment preferences or securities products, moving balances into digital assets (e.g., stablecoin) or other alternative non-bank financial platforms, changes to spending behavior due to inflation, a decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity.Several of these factors may arise from circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics, sanctions and geopolitical events and/or turmoil (including military conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us, the financial services industry or the U.S. monetary system generally, or due to a specific news event (e.g., bank failures), the further development and acceptance of nonbank digital asset ecosystems (e.g., stablecoin), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could result in our inability to sell assets or redeem investments, unforeseen outflows of cash, draws on liquidity facilities, reduced financing balances, the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio and net stable funding ratio.Our liquidity and cost of funds may be impacted by reputational damage, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit spreads can increase funding costs and result in mark-to-market or credit valuation adjustment exposures. Credit spread changes are market driven and may be influenced by market perceptions of our creditworthiness, including credit rating changes or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits or otherwise. Concentrations within our funding profile, such as by maturity, currency or counterparty, can also reduce our funding efficiency.Reduction in our credit ratings could limit our access to funding or the capital markets, increase borrowing costs or trigger additional collateral or funding requirements.Our credit ratings directly affect our borrowing costs and access to funding. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Rating agencies conduct ongoing reviews of our credit ratings based on a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors beyond our control, such as regulatory developments, macroeconomic and geopolitical conditions, changes in rating methodologies or U.S. sovereign debt ratings. Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. A downgrade could widen our credit spread, negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. Downgrades of short-term credit ratings of our parent company or bank or broker-dealer subsidiaries, could reduce or eliminate access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, a credit rating downgrade could require us or our subsidiaries to post additional collateral or permit counterparties to terminate these contracts or agreements.While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.Bank of America Corporation is a holding company, is dependent on its subsidiaries for liquidity and may be restricted from transferring funds from subsidiaries.Bank of America Corporation, as the parent company, is a separate and distinct legal entity from its bank and nonbank subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the parent company, which could result in adverse liquidity events. The parent company depends on dividends, distributions, loans and other payments from our bank and nonbank subsidiaries to fund dividend payments on our common and preferred stock and to enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainty regarding the impact of potential GSE privatization. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on credit lines or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the failure to attract or retain client deposits or invested funds, including large-scale deposit migration (e.g., from attrition resulting from clients seeking higher yielding deposits or to an alternative financial institution perceived to be safer, changing investment preferences or securities products, moving balances into digital assets (e.g., stablecoin) or other alternative non-bank financial platforms, changes to spending behavior due to inflation, a decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity.Several of these factors may arise from circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics, sanctions and geopolitical events and/or turmoil (including military conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us, the financial services industry or the U.S. monetary system generally, or due to a specific news event (e.g., bank failures), the further development and acceptance of nonbank digital asset ecosystems (e.g., stablecoin), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could result in our inability to sell assets or redeem investments, unforeseen outflows of cash, draws on liquidity facilities, reduced financing balances, the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio and net stable funding ratio.Our liquidity and cost of funds may be impacted by reputational damage, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainty regarding the impact of potential GSE privatization. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on credit lines or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the failure to attract or retain client deposits or invested funds, including large-scale deposit migration (e.g., from attrition resulting from clients seeking higher yielding deposits or to an alternative financial institution perceived to be safer, changing investment preferences or securities products, moving balances into digital assets (e.g., stablecoin) or other alternative non-bank financial platforms, changes to spending behavior due to inflation, a decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity. Several of these factors may arise from circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics, sanctions and geopolitical events and/or turmoil (including military conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us, the financial services industry or the U.S. monetary system generally, or due to a specific news event (e.g., bank failures), the further development and acceptance of nonbank digital asset ecosystems (e.g., stablecoin), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could result in our inability to sell assets or redeem investments, unforeseen outflows of cash, draws on liquidity facilities, reduced financing balances, the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio and net stable funding ratio. Our liquidity and cost of funds may be impacted by reputational damage, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit spreads can increase funding costs and result in mark-to-market or credit valuation adjustment exposures. Credit spread changes are market driven and may be influenced by market perceptions of our creditworthiness, including credit rating changes or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits or otherwise. Concentrations within our funding profile, such as by maturity, currency or counterparty, can also reduce our funding efficiency.Reduction in our credit ratings could limit our access to funding or the capital markets, increase borrowing costs or trigger additional collateral or funding requirements.Our credit ratings directly affect our borrowing costs and access to funding. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Rating agencies conduct ongoing reviews of our credit ratings based on a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors beyond our control, such as regulatory developments, macroeconomic and geopolitical conditions, changes in rating methodologies or U.S. sovereign debt ratings. Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. A downgrade could widen our credit spread, negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. Downgrades of short-term credit ratings of our parent company or bank or broker-dealer subsidiaries, could reduce or eliminate access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, a credit rating downgrade could require us or our subsidiaries to post additional collateral or permit counterparties to terminate these contracts or agreements.While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.Bank of America Corporation is a holding company, is dependent on its subsidiaries for liquidity and may be restricted from transferring funds from subsidiaries.Bank of America Corporation, as the parent company, is a separate and distinct legal entity from its bank and nonbank subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the parent company, which could result in adverse liquidity events. The parent company depends on dividends, distributions, loans and other payments from our bank and nonbank subsidiaries to fund dividend payments on our common and preferred stock and to trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit spreads can increase funding costs and result in mark-to-market or credit valuation adjustment exposures. Credit spread changes are market driven and may be influenced by market perceptions of our creditworthiness, including credit rating changes or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits or otherwise. Concentrations within our funding profile, such as by maturity, currency or counterparty, can also reduce our funding efficiency.

Liquidity is essential to our businesses. We fund our assets primarily with globally sourced deposits in our bank entities, as well as secured and unsecured liabilities transacted in the capital markets. We rely on certain secured funding sources, 9 Bank of America 9 Bank of America 9 Bank of America 9 Bank of America such as repo markets, which are typically short-term and credit-sensitive. We also engage in asset securitization transactions, including with the government-sponsored enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainties regarding the impact of GSE privatization, should it occur. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on lines of credit or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the withdrawal of or failure to attract client deposits or invested funds (e.g., from attrition driven by clients seeking higher yielding deposits or securities products, desiring to utilize an alternative financial institution perceived to be safer, changing spending behavior due to inflation, decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity.Several of these factors may arise due to circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics and geopolitical events and/or turmoil (including military conflicts, such as the Russia/Ukraine conflict and the conflicts in the Middle East, or any potential escalation of such conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us or the financial services industry generally or due to a specific news event (e.g., regional bank failures), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could include an inability to sell assets or redeem investments, unforeseen outflows of cash, the need to draw on liquidity facilities, the reduction of financing balances and the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio.Our liquidity and cost of funds may be impacted by our reputation risk, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit spreads can increase the cost of our funding and result in mark-to-market or credit valuation adjustment exposures. Changes in our credit spreads are market driven and may be influenced by market perceptions of our creditworthiness, including changes in our credit ratings or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits. Concentrations within our funding profile, such as maturities, currencies or counterparties, can also reduce our funding efficiency.Reduction in our credit ratings could limit our access to funding or the capital markets, increase borrowing costs or trigger additional collateral or funding requirements.Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Our credit ratings are subject to ongoing review by rating agencies, which consider a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors not under our control, such as regulatory developments, the macroeconomic and geopolitical environment and changes to rating methodologies.Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. Any reduction could result in a wider credit spread and negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. If the short-term credit ratings of our parent company, bank or broker-dealer subsidiaries were downgraded, we may experience loss of access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, if our or our subsidiaries’ credit ratings are downgraded, the counterparties may require additional collateral or terminate these contracts or agreements.While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.Bank of America Corporation is a holding company, is dependent on its subsidiaries for liquidity and may be restricted from transferring funds from subsidiaries.Bank of America Corporation, as the parent company, is a separate and distinct legal entity from our bank and nonbank subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the parent company, which could result in adverse liquidity events. The parent company depends on dividends, distributions, loans and other payments from our bank and nonbank subsidiaries to fund dividend payments on our preferred stock and common stock and to fund all payments on our other obligations, including debt obligations. Any inability of our subsidiaries to transfer funds, such as repo markets, which are typically short-term and credit-sensitive. We also engage in asset securitization transactions, including with the government-sponsored enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainties regarding the impact of GSE privatization, should it occur. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on lines of credit or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the withdrawal of or failure to attract client deposits or invested funds (e.g., from attrition driven by clients seeking higher yielding deposits or securities products, desiring to utilize an alternative financial institution perceived to be safer, changing spending behavior due to inflation, decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity.Several of these factors may arise due to circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics and geopolitical events and/or turmoil (including military conflicts, such as the Russia/Ukraine conflict and the conflicts in the Middle East, or any potential escalation of such conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us or the financial services industry generally or due to a specific news event (e.g., regional bank failures), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could include an inability to sell assets or redeem investments, unforeseen outflows of cash, the need to draw on liquidity facilities, the reduction of financing balances and the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio.Our liquidity and cost of funds may be impacted by our reputation risk, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit such as repo markets, which are typically short-term and credit-sensitive. We also engage in asset securitization transactions, including with the government-sponsored enterprises (GSEs), to help fund a portion of our consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainties regarding the impact of GSE privatization, should it occur. Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on lines of credit or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the withdrawal of or failure to attract client deposits or invested funds (e.g., from attrition driven by clients seeking higher yielding deposits or securities products, desiring to utilize an alternative financial institution perceived to be safer, changing spending behavior due to inflation, decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation). These factors may increase our borrowing costs and negatively impact our liquidity. Several of these factors may arise due to circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics and geopolitical events and/or turmoil (including military conflicts, such as the Russia/Ukraine conflict and the conflicts in the Middle East, or any potential escalation of such conflicts). Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us or the financial services industry generally or due to a specific news event (e.g., regional bank failures), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these potentially sudden events, whether within our control or not, could include an inability to sell assets or redeem investments, unforeseen outflows of cash, the need to draw on liquidity facilities, the reduction of financing balances and the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio. Our liquidity and cost of funds may be impacted by our reputation risk, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads. Increases in interest rates and our credit spreads can increase the cost of our funding and result in mark-to-market or credit valuation adjustment exposures. Changes in our credit spreads are market driven and may be influenced by market perceptions of our creditworthiness, including changes in our credit ratings or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits. Concentrations within our funding profile, such as maturities, currencies or counterparties, can also reduce our funding efficiency.Reduction in our credit ratings could limit our access to funding or the capital markets, increase borrowing costs or trigger additional collateral or funding requirements.Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Our credit ratings are subject to ongoing review by rating agencies, which consider a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors not under our control, such as regulatory developments, the macroeconomic and geopolitical environment and changes to rating methodologies.Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. Any reduction could result in a wider credit spread and negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. If the short-term credit ratings of our parent company, bank or broker-dealer subsidiaries were downgraded, we may experience loss of access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, if our or our subsidiaries’ credit ratings are downgraded, the counterparties may require additional collateral or terminate these contracts or agreements.While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.Bank of America Corporation is a holding company, is dependent on its subsidiaries for liquidity and may be restricted from transferring funds from subsidiaries.Bank of America Corporation, as the parent company, is a separate and distinct legal entity from our bank and nonbank subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the parent company, which could result in adverse liquidity events. The parent company depends on dividends, distributions, loans and other payments from our bank and nonbank subsidiaries to fund dividend payments on our preferred stock and common stock and to fund all payments on our other obligations, including debt obligations. Any inability of our subsidiaries to transfer funds, spreads can increase the cost of our funding and result in mark-to-market or credit valuation adjustment exposures. Changes in our credit spreads are market driven and may be influenced by market perceptions of our creditworthiness, including changes in our credit ratings or changes in broader financial market and macroeconomic conditions. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits. Concentrations within our funding profile, such as maturities, currencies or counterparties, can also reduce our funding efficiency.

We service mortgage loans on behalf of third-party securitization vehicles and other investors. If a material breach of our obligations as servicer or master servicer is committed, we may be subject to termination if the breach is not cured timely following notice, which could cause us to lose servicing income. We may also have liability for any failure by us or a third party, as a servicer or master servicer to adhere to or perform the required servicing obligation in accordance with the terms of the servicing agreements that result in impairment or loss to the loans’ owner. If any such breach was found to have occurred, it may harm our reputation, increase our servicing costs or losses due to potential indemnification obligations, result in litigation or regulatory action or adversely impact our results of operations. Also, foreclosures may result in costs, litigation or losses due to irregularities in the underlying documentation, or if the validity of a foreclosure action is challenged by a borrower or overturned by a court because of errors or deficiencies in the foreclosure process. We may also incur costs or losses relating to delays or Bank of America 16 Bank of America 16 Bank of America 16 Bank of America 16 alleged deficiencies in processing documents necessary to comply with state law governing foreclosure.Changes in the structure of and relationship among the GSEs could adversely impact our business.We rely on the GSEs to guarantee or purchase certain mortgage loans that meet their conforming loan requirements. During 2025, we sold approximately $2.3 billion of loans to GSEs, primarily Freddie Mac (FHLMC). FHLMC and Fannie Mae are currently in conservatorship, with the Federal Housing Finance Agency acting as conservator. While there have been periodic proposals to remove or exit the GSEs from conservatorship and eliminate the perceived “implicit guarantee” associated with the GSEs, none have yet to be executed successfully. We cannot predict the future prospects of the GSEs, including the timing of any recapitalization or release from conservatorship, or any legislative or rulemaking proposals regarding the GSEs’ status in the housing market. If the GSEs take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization, which could increase our cost of funds related to the origination of new mortgage loans, increase credit risk and/or impact our capacity to originate new mortgage loans. These developments could adversely affect our securities portfolios, capital levels, liquidity and results of operations.Our risk management framework may not be effective in mitigating risk and reducing the potential for losses.Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, legal risk, financial risk associated with concentration and climate risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk.Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, control or mitigate risks could result in further legal and regulatory risk and losses and adversely affect our reputation and results of operations.Regulatory, Compliance and LegalWe are highly regulated and subject to evolving government legislation and regulations and certain settlements, orders and agreements with government authorities from time to time.We operate in a highly regulated industry and are subject to evolving and comprehensive federal, state and foreign LRRs and Executive Branch Actions. This significantly affects and has the potential to increase our compliance and operational costs, restrict the scope of our existing businesses, impact potential relationships with our clients, require changes to our employment practices, business strategies, risk management, governance processes and controls and procedures, require us to hold more capital, limit our ability to pursue certain business opportunities, including the products and services we offer, reduce certain fees and rates and/or make our products and services more expensive for our clients. We are also required to file various financial and nonfinancial regulatory reports to comply with LRRs in the jurisdictions in which we operate, which results in additional compliance and operational risk.We continue to adjust our business and operations, legal entity structure, systems, disclosure, policies, procedures, processes, controls and governance, including with regard to capital and liquidity management, risk management and data management, in an effort to comply with LRRs, and evolving expectations, guidance and interpretation by regulatory authorities, including the Department of Treasury (e.g., the Internal Revenue Service (IRS) and OFAC), Financial Crimes Enforcement Network, Federal Reserve, OCC, CFPB, Financial Stability Oversight Council, FDIC, Department of Labor, SEC and CFTC in the U.S., foreign regulators, other government authorities and self-regulatory organizations. We expect to become subject to future LRRs, including beyond those currently proposed, adopted or contemplated in the U.S. or abroad, and evolving interpretations of existing and future LRRs, and may be subject to Executive Branch Actions, which may include FDIC assessments, loss allocations between financial institutions and clients regarding the use of our products and services, including electronic payments, employment practices, fair access to banking products and services, the terms of our products and services and climate and environmental risk management and sustainability reporting and disclosure. LRRs related to emerging technologies, such as AI, cybersecurity and data management, are also rapidly evolving across jurisdictions and could require changes related to deployments and operational processes and increase compliance costs and regulatory, compliance and legal risks.The cumulative effect of all of the current and possible future legislation and regulations, as well as related interpretations, on our litigation and regulatory exposure, businesses, operations, including our ability to compete, and profitability remains uncertain and necessitates that we make certain assumptions with respect to the scope and requirements of existing, prospective and proposed LRRs in our business planning and strategies. If these assumptions prove incorrect, we could be subject to increased regulatory, legal and compliance risks and costs, and potential reputational harm. Also, regulatory initiatives in the U.S. and abroad may overlap, and non-U.S. regulations and initiatives may be inconsistent or conflict with current or proposed U.S. regulations or with each other, which could lead to compliance risks and higher costs.Our regulators’ prudential and supervisory authority gives them broad power and discretion to direct our actions, and they alleged deficiencies in processing documents necessary to comply with state law governing foreclosure.Changes in the structure of and relationship among the GSEs could adversely impact our business.We rely on the GSEs to guarantee or purchase certain mortgage loans that meet their conforming loan requirements. During 2025, we sold approximately $2.3 billion of loans to GSEs, primarily Freddie Mac (FHLMC). FHLMC and Fannie Mae are currently in conservatorship, with the Federal Housing Finance Agency acting as conservator. While there have been periodic proposals to remove or exit the GSEs from conservatorship and eliminate the perceived “implicit guarantee” associated with the GSEs, none have yet to be executed successfully. We cannot predict the future prospects of the GSEs, including the timing of any recapitalization or release from conservatorship, or any legislative or rulemaking proposals regarding the GSEs’ status in the housing market. If the GSEs take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization, which could increase our cost of funds related to the origination of new mortgage loans, increase credit risk and/or impact our capacity to originate new mortgage loans. These developments could adversely affect our securities portfolios, capital levels, liquidity and results of operations.Our risk management framework may not be effective in mitigating risk and reducing the potential for losses.Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, legal risk, financial risk associated with concentration and climate risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk.Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, control or mitigate alleged deficiencies in processing documents necessary to comply with state law governing foreclosure.

We rely on the GSEs to guarantee or purchase certain mortgage loans that meet their conforming loan requirements. During 2024, we sold approximately $1.5 billion of loans to GSEs, primarily Freddie Mac (FHLMC). FHLMC and Fannie Mae are currently in conservatorship, with the Federal Housing Finance Agency acting as conservator. While there have been Bank of America 16 Bank of America 16 Bank of America 16 Bank of America 16 periodic proposals to remove or exit the GSEs from conservatorship and eliminate the perceived “implicit guarantee” associated with the GSEs, none have been successful. We cannot predict the future prospects of the GSEs, including the timing of any recapitalization or release from conservatorship, or any legislative or rulemaking proposals regarding the GSEs’ status in the housing market. If the GSEs take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization, which could increase our cost of funds related to the origination of new mortgage loans, increase credit risk and/or impact our capacity to originate new mortgage loans. These developments could adversely affect our securities portfolios, capital levels, liquidity and results of operations.Our risk management framework may not be effective in mitigating risk and reducing the potential for losses.Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, climate risk, legal risk and concentration risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk.Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI (such as machine learning and generative AI) and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, manage, control or mitigate risks could result in additional legal, regulatory and reputational risk, losses and adversely affect our results of operations.Regulatory, Compliance and LegalWe are highly regulated and subject to evolving government legislation and regulations and certain settlements, orders and agreements with government authorities from time to time.We are highly regulated and subject to evolving and comprehensive regulation under federal and state laws in the U.S. and the laws of the various foreign jurisdictions in which we operate. These laws and regulations significantly affect and have the potential to increase our compliance costs, restrict the scope of our existing businesses, require changes to our employment practices, business strategies and controls and procedures, limit our ability to pursue certain business opportunities, including the products and services we offer, reduce certain fees and rates and/or make our products and services more expensive for our clients. We are also required to file various financial and nonfinancial regulatory reports to comply with LRRs in the jurisdictions in which we operate, which results in additional compliance and operational risk.We continue to adjust our business and operations, legal entity structure, systems, disclosure, policies, procedures, processes, controls and governance, including with regard to capital and liquidity management, risk management and data management, in an effort to comply with LRRs, and evolving expectations, guidance and interpretation by regulatory authorities, including the Department of Treasury (including the Internal Revenue Service (IRS) and OFAC), Financial Crimes Enforcement Network, Federal Reserve, OCC, CFPB, Financial Stability Oversight Council, FDIC, Department of Labor, SEC and CFTC in the U.S., foreign regulators, other government authorities and self-regulatory organizations. Further, we expect to become subject to future LRRs, including beyond those currently proposed, adopted or contemplated in the U.S. or abroad, and evolving interpretations of existing and future LRRs, which may include policies and rulemaking related to FDIC assessments, loss allocations between financial institutions and clients regarding the use of our products and services, including electronic payments, emerging technologies, such as the development and use of AI (including machine learning and generative AI), cybersecurity and data, employment practices and further climate and environmental risk management and sustainability reporting and disclosure, including emissions.The cumulative effect of all of the current and possible future legislation and regulations, as well as related interpretations, on our litigation and regulatory exposure, businesses, operations, including our ability to compete, and profitability remains uncertain and necessitates that we make certain assumptions with respect to the scope and requirements of existing, prospective and proposed LRRs in our business planning and strategies. If these assumptions prove incorrect, we could be subject to increased regulatory, legal and compliance risks and costs, and potential reputational harm. Also, regulatory initiatives in the U.S. and abroad may overlap, and non-U.S. regulations and initiatives may be inconsistent or conflict with current or proposed U.S. regulations or with each other, which could lead to compliance risks and higher costs.Our regulators’ prudential and supervisory authority gives them broad power and discretion to direct our actions, and they have assumed an active oversight, inspection and investigatory role across the financial services industry. Regulatory focus is not limited to LRRs applicable to the financial services industry, but includes other significant LRRs that apply across industries and jurisdictions, including those related to anti-money laundering, anti-bribery, anti-corruption know-your-customer requirements, embargo programs and economic sanctions.We are also subject to LRRs in the U.S. and abroad, including the GDPR and CCPA, and a number of additional jurisdictions enacting or considering similar laws or amendments to existing laws, regarding privacy and the disclosure, collection, use, sharing and safeguarding of personally identifiable information, including our employees, clients, suppliers, counterparties and other third parties, the violation of which could result in litigation, regulatory fines, periodic proposals to remove or exit the GSEs from conservatorship and eliminate the perceived “implicit guarantee” associated with the GSEs, none have been successful. We cannot predict the future prospects of the GSEs, including the timing of any recapitalization or release from conservatorship, or any legislative or rulemaking proposals regarding the GSEs’ status in the housing market. If the GSEs take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization, which could increase our cost of funds related to the origination of new mortgage loans, increase credit risk and/or impact our capacity to originate new mortgage loans. These developments could adversely affect our securities portfolios, capital levels, liquidity and results of operations.Our risk management framework may not be effective in mitigating risk and reducing the potential for losses.Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, climate risk, legal risk and concentration risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk.Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI (such as machine learning and generative AI) and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, manage, control or mitigate risks could result in additional legal, regulatory and reputational risk, losses and adversely affect our results of operations.Regulatory, Compliance and LegalWe are highly regulated and subject to evolving government legislation and regulations and certain settlements, orders and agreements with government authorities from time to time.We are highly regulated and subject to evolving and comprehensive regulation under federal and state laws in the U.S. and the laws of the various foreign jurisdictions in which we periodic proposals to remove or exit the GSEs from conservatorship and eliminate the perceived “implicit guarantee” associated with the GSEs, none have been successful. We cannot predict the future prospects of the GSEs, including the timing of any recapitalization or release from conservatorship, or any legislative or rulemaking proposals regarding the GSEs’ status in the housing market. If the GSEs take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization, which could increase our cost of funds related to the origination of new mortgage loans, increase credit risk and/or impact our capacity to originate new mortgage loans. These developments could adversely affect our securities portfolios, capital levels, liquidity and results of operations.

Our credit ratings directly affect our borrowing costs and access to funding. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Rating agencies conduct ongoing reviews of our credit ratings based on a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors beyond our control, such as regulatory developments, macroeconomic and geopolitical conditions, changes in rating methodologies or U.S. sovereign debt ratings. Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. A downgrade could widen our credit spread, negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. Downgrades of short-term credit ratings of our parent company or bank or broker-dealer subsidiaries, could reduce or eliminate access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, a credit rating downgrade could require us or our subsidiaries to post additional collateral or permit counterparties to terminate these contracts or agreements. While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.

Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. Credit ratings are also important to investors, clients or counterparties when we compete in certain markets and seek to engage in certain transactions, including over-the-counter (OTC) derivatives. Our credit ratings are subject to ongoing review by rating agencies, which consider a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors not under our control, such as regulatory developments, the macroeconomic and geopolitical environment and changes to rating methodologies. Rating agencies could adjust our credit ratings at any time and there can be no assurance as to whether or when a downgrade could occur. Any reduction could result in a wider credit spread and negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. If the short-term credit ratings of our parent company, bank or broker-dealer subsidiaries were downgraded, we may experience loss of access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, if our or our subsidiaries’ credit ratings are downgraded, the counterparties may require additional collateral or terminate these contracts or agreements. While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain and depend upon numerous dynamic, complex and inter-related factors and assumptions, including the relationship between long-term and short-term credit ratings and the behaviors of clients, investors and counterparties.

We operate in a highly competitive environment and experience intense competition from local and global bank and nonbank financial institutions and new market entrants. Increasing pressure to provide products and services on more attractive terms, including lower fees, lower cost investment strategies and higher interest rates on deposits, may impact our ability to effectively compete. Also, we may be disadvantaged by our size, the jurisdictions in which we are organized or operate or from more stringent regulatory requirements applicable to us than to nonbank financial institutions, those obtaining limited bank charters or other actual or perceived competitors. The growth of and mergers among traditional financial services companies have increased competition. Emerging technologies and the growth of e-commerce have lowered geographic and monetary barriers, made it easier for non-depository institutions to offer traditional banking products and services and allowed non-traditional financial service providers and technology companies to compete with traditional financial service companies in providing electronic and internet-based financial solutions and services, including electronic securities trading with low or no fees and commissions, marketplace lending, financial data aggregation and payment processing services, including real-time payment platforms. Further, clients may choose other market participants who engage in business or offer products in areas we deem speculative or risky rather than traditional products. Increased competition may reduce our market share, net interest margin and fee-based revenue and negatively affect our results of operations, including through pricing pressure, increased investment to improve the quality and delivery of our technology and/or affecting our clients’ willingness to do business with us.

We operate in a highly competitive environment and experience intense competition from local and global bank and nonbank financial institutions and new entrants in domestic and foreign markets. There is increasing pressure to provide products and services on more attractive terms, including lower fees, lower cost investment strategies and higher interest rates on deposits, which may impact our ability to effectively compete. Also, we may be disadvantaged from more stringent regulatory requirements applicable to us than to nonbank financial institutions or other actual or perceived competitors. The growth of and mergers among traditional financial services companies have increased competition. Emerging technologies and the growth of e-commerce have lowered geographic and monetary barriers of other financial institutions, made it easier for non-depository institutions to offer traditional banking products and services and allowed non-traditional financial service providers and technology companies to compete with traditional financial service companies in providing electronic and internet-based financial solutions and services, including electronic securities trading with low or no fees and commissions, marketplace lending, financial data aggregation and payment processing services, including real-time payment platforms. Further, clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky as an alternative to traditional products. Increased competition may reduce our market share, net interest margin and revenues from our fee-based products and services and negatively affect our earnings, including by pressuring us to lower pricing, requiring additional investment to improve the quality and delivery of our technology and/or affecting our clients’ willingness to do business with us.

We use models enterprise-wide, including to forecast losses, project revenue and expenses, assess and control our operations and financial condition, assist in capital planning, manage liquidity and measure, forecast and assess capital and liquidity requirements for credit, market, operational and strategic risks. Under our Enterprise Model Risk Policy, Model Risk Management is required to perform end-to-end model oversight, including independent validation before initial use, implementation monitoring, ongoing monitoring reviews through outcomes analysis and benchmarking, and periodic revalidation. However, models are inherently limited by simplifying assumptions, uncertainty in economic and financial outcomes, and emerging risks, including from applications that rely on AI. Our models may not be sufficiently predictive of future results, including from limited historical patterns, extreme or unanticipated market movements or clients’ behavior and 21 Bank of America 21 Bank of America 21 Bank of America 21 Bank of America liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events), which could limit their effectiveness and require timely recalibration. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of future downturns and would magnify the limitations inherent in using historical data to manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the inherent limitations in using historical data to manage risk. Our models may also be adversely impacted by human error and may be ineffective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain erroneous data, assumptions, valuations, formulas or algorithms, our applications running the models do not perform as expected or AI applications are not developed and trained properly or contain biases (due to model design or input data). Regardless of steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, failure of our models to properly anticipate and manage risks could result in operational, reputational and financial harm, including funding or liquidity shortfalls, adverse business decisions and regulatory risk.Failure to properly manage data may adversely affect our ability to manage compliance risk and business needs, and result in errors in our operations, reporting and decision-making, and compliance with LRRs.We rely on our ability to manage and process data accurately, timely and completely, including capturing, transporting, aggregating, using, transmitting data externally, and retaining and protecting data appropriately. While we continually update our policies, programs, processes and practices and take steps to leverage emerging technologies, such as automation, AI and robotics, our data management processes may not be effective and are subject to weaknesses and failures, including human error, data limitations, process delays, system failure or failed controls. Failure to effectively manage data accurately, timely and completely may adversely impact its quality and reliability and our ability to manage current and emerging risks, produce accurate financial, nonfinancial, regulatory, operational, environmental and social reporting, detect or surveil potential misconduct or non-compliance with LRRs, and to manage our business needs, strategic decision-making, resolution strategy and operations. The failure to establish and maintain effective, efficient and controlled data management could adversely impact our development of products and client relationships and increase operational losses and regulatory and reputational harm.Our operations, businesses and clients could be adversely affected by climate-related matters and impacts.Climate-related matters present short-, medium- and long-term risks. This includes physical risks such as extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic risks such as rising average global temperatures and sea levels. These events could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt our operations or those of our clients or third parties, disrupt supply chains or distribution networks, damage collateral and/or result in market volatility, cause rapid deposit outflows, drawdowns of credit facilities or insurance shortfalls, or deteriorate the value of collateral.We also face transition risk associated with the shift to a low-carbon economy. Changes in consumer preferences, market pressures, technology advancements and additional legislation, regulatory, compliance and legal requirements could alter our strategic planning, limit certain business activities and products and services offered, amplify credit and market risks, negatively impact asset values, insurance availability and cost, require capital expenditures and changes in technology and markets, increase expenses and adversely impact our capital requirements and results of operations. Climate-related regulatory approaches and disclosure continue to evolve and diverge across jurisdictions (including the availability of certain reporting exemptions), including among the U.S. and non-U.S., and within the U.S., which could adversely impact our legal, compliance and public disclosure risks and costs. Availability, quality and disclosure of climate-related data, including from third parties, remain challenging, which may result in legal, compliance and/or reputational harm.Our climate-related strategies, policies, and disclosures, which may evolve over time, our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Divergent stakeholder perspectives increase the likelihood that any action or inaction we take regarding climate-related matters will be perceived negatively, which could adversely impact our reputation and businesses. Achieving our climate-related goals and targets, including our goals to achieve net zero greenhouse gas (GHG) emissions before 2050 in our financing activities, operations and supply chain, our interim 2030 GHG targets, including financed emissions, and our sustainable finance goals, are subject to risks and uncertainties, many outside of our control, such as technological advances, clearly defined industry sector roadmaps, public policies, better emissions data reporting and engagement with clients, suppliers, investors, government officials and other stakeholders. Climate-related risks continue to evolve and are difficult to predict, identify, monitor and effectively mitigate, and could adversely affect us.Our ability to attract, develop and retain qualified employees is critical to our success, business prospects and competitive position.Our performance and competitive position is heavily dependent on the talents, development and efforts of highly skilled individuals. Competition for qualified personnel is intense from within and outside the financial services industry. Our competitors include global institutions and institutions subject to different compensation and hiring regulations than those imposed on us. Also, our ability to attract, develop and retain employees could be impacted by our reputation, professional and development opportunities, changes in regulation or enforcement practices, changes in workforce concerns, expectations, practices and preferences (e.g. remote work), and increasing labor shortages and competition for labor, which could increase labor costs.We must provide market-level compensation to attract and retain qualified personnel. As a large financial and banking institution, we are and may become subject to additional limitations on compensation practices by the Federal Reserve, the OCC, the FDIC and other global regulators, which may not affect our competitors. Also, because a substantial portion of compensation paid to many of our employees is equity-based awards based on the value of our common stock, declines in our profitability or outlook could adversely affect the ability to attract and retain employees. If we are unable to continue to attract, develop and retain qualified individuals, our business prospects and competitive position could be adversely affected. liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events), which could limit their effectiveness and require timely recalibration. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of future downturns and would magnify the limitations inherent in using historical data to manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the inherent limitations in using historical data to manage risk. Our models may also be adversely impacted by human error and may be ineffective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain erroneous data, assumptions, valuations, formulas or algorithms, our applications running the models do not perform as expected or AI applications are not developed and trained properly or contain biases (due to model design or input data). Regardless of steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, failure of our models to properly anticipate and manage risks could result in operational, reputational and financial harm, including funding or liquidity shortfalls, adverse business decisions and regulatory risk.Failure to properly manage data may adversely affect our ability to manage compliance risk and business needs, and result in errors in our operations, reporting and decision-making, and compliance with LRRs.We rely on our ability to manage and process data accurately, timely and completely, including capturing, transporting, aggregating, using, transmitting data externally, and retaining and protecting data appropriately. While we continually update our policies, programs, processes and practices and take steps to leverage emerging technologies, such as automation, AI and robotics, our data management processes may not be effective and are subject to weaknesses and failures, including human error, data limitations, process delays, system failure or failed controls. Failure to effectively manage data accurately, timely and completely may adversely impact its quality and reliability and our ability to manage current and emerging risks, produce accurate financial, nonfinancial, regulatory, operational, environmental and social reporting, detect or surveil potential misconduct or non-compliance with LRRs, and to manage our business needs, strategic decision-making, resolution strategy and operations. The failure to establish and maintain effective, efficient and controlled data management could adversely impact our development of products and client relationships and increase operational losses and regulatory and reputational harm.Our operations, businesses and clients could be adversely affected by climate-related matters and impacts.Climate-related matters present short-, medium- and long-term risks. This includes physical risks such as extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic risks such as rising average global temperatures and sea levels. These events could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt our operations or those of our clients or third parties, disrupt supply chains or distribution networks, damage collateral and/or result in market volatility, cause rapid deposit outflows, drawdowns of credit facilities or insurance shortfalls, or deteriorate the value of collateral.We also face transition risk associated with the shift to a low-carbon economy. Changes in consumer preferences, market pressures, technology advancements and additional legislation, liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events), which could limit their effectiveness and require timely recalibration. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of future downturns and would magnify the limitations inherent in using historical data to manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the inherent limitations in using historical data to manage risk. Our models may also be adversely impacted by human error and may be ineffective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain erroneous data, assumptions, valuations, formulas or algorithms, our applications running the models do not perform as expected or AI applications are not developed and trained properly or contain biases (due to model design or input data). Regardless of steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, failure of our models to properly anticipate and manage risks could result in operational, reputational and financial harm, including funding or liquidity shortfalls, adverse business decisions and regulatory risk.

We use models enterprise-wide, including to forecast losses, project revenue and expenses, assess and control our operations and financial condition, assist in capital planning, manage liquidity and measure, forecast and assess capital and liquidity requirements for credit, market, operational and strategic risks. Under our Enterprise Model Risk Policy, Model Risk Management is required to perform end-to-end model oversight, including independent validation before initial use, implementation monitoring, ongoing monitoring reviews through outcomes analysis and benchmarking, and periodic revalidation. However, models are subject to inherent limitations from simplifying assumptions, uncertainty regarding economic and financial outcomes, and emerging risks, including from applications that rely on AI. Our models may not be sufficiently predictive of future results, such as due to limited historical patterns, extreme or unanticipated market movements or clients’ behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events), which could limit their effectiveness and require timely recalibration. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of the next downturn and would magnify the limitations inherent in using historical data to 21 Bank of America 21 Bank of America 21 Bank of America 21 Bank of America manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the limitations inherent in using historical data to manage risk. Our models may also be adversely impacted by human error and may not be effective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain biases, erroneous data, assumptions, valuations, formulas or algorithms, or our applications running the models do not perform as expected. Regardless of the steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, we could suffer operational, reputational and financial harm, including funding or liquidity shortfalls, and adverse business decisions and regulatory risk if models fail to properly anticipate and manage risks.Failure to properly manage data may adversely affect our ability to manage compliance risk and business needs, and result in errors in our operations, reporting and decision-making, and non-compliance with LRRs. We rely on our ability to manage and process data accurately, timely and completely, including capturing, transporting, aggregating, using, transmitting data externally, and retaining and protecting data appropriately. While we continually update our policies, programs, processes and practices and take steps to leverage emerging technologies, such as automation, AI and robotics, our data management processes may not be effective and are subject to weaknesses and failures, including human error, data limitations, process delays, system failure or failed controls. Failure to effectively manage data accurately, timely and completely may adversely impact its quality and reliability and our ability to manage current and emerging risks, produce accurate financial, nonfinancial, regulatory, operational, environmental and social reporting, detect or surveil potential misconduct or non-compliance with LRRs, and to manage our business needs, strategic decision-making, resolution strategy and operations. The failure to establish and maintain effective, efficient and controlled data management could adversely impact our development of products and client relationships and increase operational losses and regulatory and reputational risk.Our operations, businesses and clients could be adversely affected by the impacts related to climate change.Climate change and related environmental sustainability matters present short-, medium- and long-term risks. The physical risks include an increase in the frequency and severity of extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic longer-term shifts such as rising average global temperatures and sea levels. Such disasters and effects could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt the operations of us and our clients or third parties, cause supply chain or distribution network disruptions, damage collateral and/or result in market volatility, rapid deposit outflows or drawdowns of credit facilities, the deterioration of the value of collateral or insurance shortfalls.There is also increasing risk related to the transition to a low-carbon economy. Changes in consumer preferences or financial condition of our clients and counterparties, market pressures, advancements in technology and additional legislation, regulatory, compliance and legal requirements could alter our strategic planning and the scope of our existing businesses, limit our ability to pursue certain business activities and offer certain products and services, amplify credit and market risks, negatively impact asset values, require capital expenditures and changes in technology and markets, including supply chain and insurance availability and cost, increase expenses and adversely impact our capital requirements and results of operations. Particularly, there is a global regulatory focus on climate change and existing and pending disclosure requirements in various jurisdictions, with jurisdictional divergence, which is expected to impact our legal, compliance and public disclosure risks and costs.Our climate change strategies, policies, and disclosures, which may evolve over time, our ability to achieve our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Due to divergent views of stakeholders, we are at increased risk that any action, or lack thereof, by us concerning our response to climate change will be perceived negatively by some stakeholders, which could adversely impact our reputation and businesses. Our ability to meet our climate-related goals and targets, including our goal to achieve certain greenhouse gas (GHG) emissions targets by 2030 and net zero GHG emissions in our financing activities, operations and supply chain before 2050, is subject to risks and uncertainties, many of which are outside of our control, such as technological advances, clearly defined roadmaps for industry sectors, public policies and better emissions data reporting, and ongoing engagement with clients, suppliers, investors, government officials and other stakeholders. Due to the evolving nature of climate-related risks, which are expected to increase over time, it is difficult to predict, identify, monitor and effectively mitigate climate-related risks and uncertainties.Furthermore, there are and will continue to be challenges related to the availability, quality and disclosure of climate-related data, including data obtained from third parties, which may result in legal, compliance and/or reputational harm.Our ability to attract, develop and retain qualified employees is critical to our success, business prospects and competitive position.Our performance and competitive position is heavily dependent on the talents, development and efforts of highly skilled individuals. Competition for qualified personnel is intense from within and outside the financial services industry. Our competitors include global institutions and institutions subject to different compensation and hiring regulations than those imposed on us. Also, our ability to attract, develop and retain employees could be impacted by our reputation, professional and development opportunities, changes in regulation or enforcement practices, changes in workforce concerns, expectations, practices and preferences (including remote work), and increasing labor shortages and competition for labor, which could increase labor costs. We must provide market-level compensation to attract and retain qualified personnel. As a large financial and banking institution, we are and may become subject to additional limitations on compensation practices by the Federal Reserve, the OCC, the FDIC and other global regulators, which may not affect our competitors. Also, because a substantial portion of compensation paid to many of our employees is equity-based awards based on the value of our common stock, declines in our profitability or outlook could adversely affect the ability to attract and retain employees. If we are unable to continue to attract, develop and retain qualified individuals, our business prospects and competitive position could be adversely affected. manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the limitations inherent in using historical data to manage risk. Our models may also be adversely impacted by human error and may not be effective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain biases, erroneous data, assumptions, valuations, formulas or algorithms, or our applications running the models do not perform as expected. Regardless of the steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, we could suffer operational, reputational and financial harm, including funding or liquidity shortfalls, and adverse business decisions and regulatory risk if models fail to properly anticipate and manage risks.Failure to properly manage data may adversely affect our ability to manage compliance risk and business needs, and result in errors in our operations, reporting and decision-making, and non-compliance with LRRs. We rely on our ability to manage and process data accurately, timely and completely, including capturing, transporting, aggregating, using, transmitting data externally, and retaining and protecting data appropriately. While we continually update our policies, programs, processes and practices and take steps to leverage emerging technologies, such as automation, AI and robotics, our data management processes may not be effective and are subject to weaknesses and failures, including human error, data limitations, process delays, system failure or failed controls. Failure to effectively manage data accurately, timely and completely may adversely impact its quality and reliability and our ability to manage current and emerging risks, produce accurate financial, nonfinancial, regulatory, operational, environmental and social reporting, detect or surveil potential misconduct or non-compliance with LRRs, and to manage our business needs, strategic decision-making, resolution strategy and operations. The failure to establish and maintain effective, efficient and controlled data management could adversely impact our development of products and client relationships and increase operational losses and regulatory and reputational risk.Our operations, businesses and clients could be adversely affected by the impacts related to climate change.Climate change and related environmental sustainability matters present short-, medium- and long-term risks. The physical risks include an increase in the frequency and severity of extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic longer-term shifts such as rising average global temperatures and sea levels. Such disasters and effects could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt the operations of us and our clients or third parties, cause supply chain or distribution network disruptions, damage collateral and/or result in market volatility, rapid deposit outflows or drawdowns of credit facilities, the deterioration of the value of collateral or insurance shortfalls.There is also increasing risk related to the transition to a low-carbon economy. Changes in consumer preferences or financial condition of our clients and counterparties, market pressures, advancements in technology and additional legislation, regulatory, compliance and legal requirements could alter our strategic planning and the scope of our existing businesses, limit our ability to pursue certain business activities and offer certain products and services, amplify credit and market risks, negatively impact asset values, require capital manage risk. Market conditions in recent years have involved unprecedented dislocations and highlight the limitations inherent in using historical data to manage risk. Our models may also be adversely impacted by human error and may not be effective if we fail to properly oversee, regularly review and detect their flaws during our review and monitoring processes, they contain biases, erroneous data, assumptions, valuations, formulas or algorithms, or our applications running the models do not perform as expected. Regardless of the steps we take to design effective controls, governance, monitoring and testing, and implement new technology and automated processes, we could suffer operational, reputational and financial harm, including funding or liquidity shortfalls, and adverse business decisions and regulatory risk if models fail to properly anticipate and manage risks.

We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, an SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities (e.g., payment of dividends and/or repurchase of common stock). If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted. Also, our ability to pay dividends on or repurchase our common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If our SCB, G-SIB surcharge or countercyclical capital buffer requirements increase, our dividends and common stock repurchases could decrease. For example, our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could increase further in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events. Regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital, RWA or leverage exposure is calculated, and/or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may increase our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold. Changes to and compliance with regulatory capital and liquidity requirements may impact our operations by requiring the liquidation of assets, increased borrowings, issuance of additional securities, reduced common stock repurchases or dividends, limits to compensation practices, ceased or altered operations, modification of pricing strategies and business activities, and/or holding of highly liquid assets. Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing certain 19 Bank of America 19 Bank of America 19 Bank of America 19 Bank of America parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which could impact our SCB and require us to hold additional capital. Proposed or future Federal Reserve rulemaking, including to the SCB calculation, CCAR stress tests or otherwise, may impact our SCB requirement.Also, U.S. banking regulators are expected to release proposals in 2026 to revise methodologies for measuring and reporting risk-based capital adequacy, including the calculation of RWA and G-SIB surcharge. The timing and composition of such proposals are uncertain. Final rules issued following those proposals could adversely impact our capital requirements.Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require the 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 assumptions, estimates or judgments are erroneously applied, we could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the accounting standards, including the SEC, banking regulators 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 may be difficult to predict and could impact the preparation and reporting of our financial statements, including the application of new or revised standards retrospectively, resulting in unexpected losses, revisions to prior-period financial statements and other adverse impacts to us, including legal and regulatory risk.We may be adversely affected by changes in U.S. and non-U.S. tax laws and regulations.We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the 2025 Budget Reconciliation Act. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently enacted or being enacted into law in some OECD countries in which we operate, will impose a 15 percent global minimum tax on certain taxpayers on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material.Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Business model changes impacting profitability and/or adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead management to reassess and/or change its current conclusion that no valuation allowance is necessary for our U.K. net DTA.ReputationDamage to our reputation could harm our businesses, including our competitive position and business prospects.Our ability to attract and retain clients, investors and employees is impacted by our reputation. Reputational harm can arise from various sources that affect public trust, including actual or perceived business activities and activities of our officers, directors, employees, other representatives, clients and third parties, including counterparties, such as fraud, misconduct and unethical behavior, our ability to detect, prevent and/or respond to fraud perpetrated against our clients, and the handling of related disputes regarding the use of our products and services, including electronic payments, effectiveness of our internal controls, the fees charged to our clients, including overdraft and non-sufficient funds fees, compensation practices, lending practices, suitability or reasonableness of particular trading or investment strategies, the services offered to our clients, the reliability of our research and models and prohibiting clients from engaging in certain transactions.Our reputation and business prospects may also be harmed by actual or perceived failure to deliver the products, service standards and quality expected, protect our clients and/or recognize and address client complaints, maintain effective compliance, properly implement technology changes and manage and use of emerging technologies, including AI, maintain effective data management, as well as cybersecurity incidents and information and security breaches affecting us and our employees, clients and third parties, which have occurred and are expected to continue with increasing frequency and severity, prolonged or repeated system outages, our privacy policies, the improper or unintended disclosure of or failure to safeguard personal, proprietary or confidential information, the breach of our fiduciary obligations, employment practices and the handling of widespread health emergencies or pandemics. Our reputation may also be harmed by litigation and/or regulatory matters and their outcomes, and/or criticism or challenges by third parties, relating to the topics discussed above or otherwise. Challenges and/or criticisms to our environmental and social practices, disclosures and benefits of our products, services or transactions, and those of our clients and third parties, including from third parties, who may have diverging views on those practices and disclosures, may also harm our reputation.Perceptions of our liquidity and financial condition, actions by the financial services industry generally, or by certain members or individuals in the industry may harm our reputation. Adverse publicity or negative information, including social media posts by employees, the media or otherwise, whether or not accurate, may trigger a loss of trust or confidence on the part of clients, counterparties, shareholders, investors, debt holders, market analysts, other relevant parties or regulators, adversely impacting our business prospects and results of operations.We are subject to complex and evolving LRRs and interpretations, including regarding fair lending activity, UDAAP, electronic funds transfers, know-your-customer requirements, data protection and privacy (e.g., the GDPR and the CCPA), cross-border data movement and data localization, cybersecurity, the use and development of AI, data and technology and other matters, as well as evolving and expansive interpretations of these LRRs. Principles concerning the appropriate scope of consumer and commercial privacy vary considerably across jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy and data protection remains fluid. parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which could impact our SCB and require us to hold additional capital. Proposed or future Federal Reserve rulemaking, including to the SCB calculation, CCAR stress tests or otherwise, may impact our SCB requirement.Also, U.S. banking regulators are expected to release proposals in 2026 to revise methodologies for measuring and reporting risk-based capital adequacy, including the calculation of RWA and G-SIB surcharge. The timing and composition of such proposals are uncertain. Final rules issued following those proposals could adversely impact our capital requirements.Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require the 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 assumptions, estimates or judgments are erroneously applied, we could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the accounting standards, including the SEC, banking regulators 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 may be difficult to predict and could impact the preparation and reporting of our financial statements, including the application of new or revised standards retrospectively, resulting in unexpected losses, revisions to prior-period financial statements and other adverse impacts to us, including legal and regulatory risk.We may be adversely affected by changes in U.S. and non-U.S. tax laws and regulations.We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the 2025 Budget Reconciliation Act. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently enacted or being enacted into law in some OECD countries in which we operate, will impose a 15 percent global minimum tax on certain taxpayers on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material.Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Business model changes impacting profitability and/or adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead management to reassess and/or change its current conclusion that no valuation allowance is necessary for our U.K. net DTA. parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which could impact our SCB and require us to hold additional capital. Proposed or future Federal Reserve rulemaking, including to the SCB calculation, CCAR stress tests or otherwise, may impact our SCB requirement. Also, U.S. banking regulators are expected to release proposals in 2026 to revise methodologies for measuring and reporting risk-based capital adequacy, including the calculation of RWA and G-SIB surcharge. The timing and composition of such proposals are uncertain. Final rules issued following those proposals could adversely impact our capital requirements.

We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, a SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities, such as our ability to pay dividends and/or repurchase our common stock. If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted. From time to time regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital or RWA is calculated, or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may cause an increase in our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold.In 2023, U.S. banking regulators issued notices of proposed rulemaking to revise the measurement of RWA and the G-SIB surcharge calculation, both of which may be re-proposed. Also, in 2023, U.S. banking regulators issued proposed changes to the long-term debt requirements for TLAC, which may impact eligibility of certain debt instruments, and in 2024, the Federal Reserve separately confirmed it is considering changes to existing, as well as new, liquidity requirements. The timing and composition of any such proposals or re-proposals remain uncertain due to various factors, including changes of leadership positions in the U.S. bank regulatory agencies. Our ability to pay dividends or repurchase common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If increases occur in our SCB, G-SIB surcharge or countercyclical capital buffer, our dividends and common stock repurchases, could decrease. For example, in 2024, our SCB increased by 70 bps to 3.2 percent and our G-SIB surcharge increased 50 bps to 3.0 percent. Our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could further increase in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events. Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing on parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which may impact our SCB level and require us to hold additional capital. In 2024, the Federal Reserve announced that it intends to propose potential changes to bank stress tests, which could impact our SCB. Changes to and compliance with the regulatory capital and liquidity requirements may impact our operations by requiring us to liquidate assets, increase borrowings, issue additional securities, reduce common stock repurchases or dividends, limit compensation practices, cease or alter certain operations, pricing strategies and business activities or hold highly liquid assets, adversely affecting our results of operations. We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, a SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities, such as our ability to pay dividends and/or repurchase our common stock. If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted. From time to time regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital or RWA is calculated, or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may cause an increase in our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold. In 2023, U.S. banking regulators issued notices of proposed rulemaking to revise the measurement of RWA and the G-SIB surcharge calculation, both of which may be re-proposed. Also, in 2023, U.S. banking regulators issued proposed changes to the long-term debt requirements for TLAC, which may impact eligibility of certain debt instruments, and in 2024, the Federal Reserve separately confirmed it is considering changes to existing, as well as new, liquidity requirements. The timing and composition of any such proposals or re-proposals remain uncertain due to various factors, including changes of leadership positions in the U.S. bank regulatory agencies. Our ability to pay dividends or repurchase common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If increases occur in our SCB, G-SIB surcharge or countercyclical capital buffer, our dividends and common stock repurchases, could decrease. For example, in 2024, our SCB increased by 70 bps to 3.2 percent and our G-SIB surcharge increased 50 bps to 3.0 percent. Our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could further increase in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events. Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing on parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which may impact our SCB level and require us to hold additional capital. In 2024, the Federal Reserve announced that it intends to propose potential changes to bank stress tests, which could impact our SCB. Changes to and compliance with the regulatory capital and liquidity requirements may impact our operations by requiring us to liquidate assets, increase borrowings, issue additional securities, reduce common stock repurchases or dividends, limit compensation practices, cease or alter certain operations, pricing strategies and business activities or hold highly liquid assets, adversely affecting our results of operations. 19 Bank of America 19 Bank of America 19 Bank of America 19 Bank of America Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require the 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 assumptions, estimates or judgments are erroneously applied, we could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the accounting standards, including the SEC, banking regulators 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 may be difficult to predict and could impact the preparation and reporting of our financial statements, including the application of new or revised standards retrospectively, resulting in unexpected losses, revisions to prior-period financial statements and other adverse impacts to us, including legal and regulatory risk.We may be adversely affected by changes in U.S. and non-U.S. tax laws and regulations.We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the Tax Cuts and Jobs Act of 2017 and Inflation Reduction Act of 2022. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently being enacted into law in some OECD countries in which we operate, are expected to impose a 15 percent global minimum tax on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material.Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead our management to reassess and/or change its current conclusion that no valuation allowance is necessary with respect to our U.K. net DTA.ReputationDamage to our reputation could harm our businesses, including our competitive position and business prospects.Our ability to attract and retain clients, investors and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including actual or perceived activities of our officers, directors, employees, other representatives, clients and third parties, including counterparties, such as fraud, misconduct and unethical behavior, adequacy of our ability to detect, prevent and/or respond to fraud perpetrated against our clients, and the handling of related disputes regarding the use of our products and services, including electronic payments, effectiveness of our internal controls, the fees charged to our clients, including overdraft and non-sufficient funds fees, compensation practices, lending practices, suitability or reasonableness of particular trading or investment strategies, the services offered to our clients, the reliability of our research and models and prohibiting clients from engaging in certain transactions.Our reputation may also be harmed by actual or perceived failure to deliver the products, standards of service and quality expected by our clients and the community, including the overstatement or mislabeling of the environmental benefits of our products, services or transactions, the failure to protect our clients and/or recognize and address client complaints, compliance failures, technology changes, the implementation, management and use of emerging technologies, including AI, the failure to maintain effective data management, cybersecurity incidents and information and security breaches affecting us and our employees, clients and third parties, which have occurred and which we expect to continue to occur with increased frequency and severity, prolonged or repeated system outages, our privacy policies, the unintended disclosure of or failure to safeguard personal, proprietary or confidential information, the breach of our fiduciary obligations, employment practices and the handling of widespread health emergencies or pandemics. Our reputation may also be harmed by litigation and/or regulatory matters and their outcomes, and/or criticism or challenges by third parties, relating to the topics discussed above or otherwise. Challenges and criticisms to our environmental and social practices and disclosures, and those of our clients and third parties, including from third parties, who may have diverging views regarding those practices and disclosures, may also harm our reputation.Increases in market interest rates have resulted in increased focus on asset and liability management, including HTM and AFS securities and related unrealized losses. Perceptions of our liquidity and financial condition, actions by the financial services industry generally, or by certain members or individuals in the industry may harm our reputation. Adverse publicity or negative information posted on social media by employees, the media or otherwise, whether or not factually correct, may trigger a loss of trust or confidence on the part of clients, counterparties, shareholders, investors, debt holders, market analysts, other relevant parties or regulators, adversely impacting our business prospects and results of operations.We are subject to complex and evolving LRRs and interpretations, including regarding fair lending activity, UDAAP, electronic funds transfers, know-your-customer requirements, data protection and privacy (including the GDPR and the CCPA), cross-border data movement and data localization, cybersecurity, the use and development of AI, data and technology and other matters, as well as evolving and expansive interpretations of these LRRs. Principles concerning the appropriate scope of consumer and commercial privacy vary considerably across jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy and data protection remains fluid. These laws may be interpreted and applied by various jurisdictions inconsistent with our current or future practices, or with one another. If personal, confidential or proprietary information of clients in our possession, or in the possession of third parties or financial data aggregators, is mishandled, misused or mismanaged, or if we do not timely or adequately address such information, we may face regulatory, legal and operational risks, which could adversely affect our reputation, financial condition and results of operations. Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require the 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 assumptions, estimates or judgments are erroneously applied, we could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the accounting standards, including the SEC, banking regulators 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 may be difficult to predict and could impact the preparation and reporting of our financial statements, including the application of new or revised standards retrospectively, resulting in unexpected losses, revisions to prior-period financial statements and other adverse impacts to us, including legal and regulatory risk.We may be adversely affected by changes in U.S. and non-U.S. tax laws and regulations.We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the Tax Cuts and Jobs Act of 2017 and Inflation Reduction Act of 2022. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently being enacted into law in some OECD countries in which we operate, are expected to impose a 15 percent global minimum tax on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material.Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead our management to reassess and/or change its current conclusion that no valuation allowance is necessary with respect to our U.K. net DTA.ReputationDamage to our reputation could harm our businesses, including our competitive position and business prospects.Our ability to attract and retain clients, investors and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including actual or perceived activities of our officers, directors, employees, other representatives, clients and third parties, including counterparties, such as fraud, misconduct and unethical behavior, adequacy of our ability to detect, prevent and/or respond to fraud perpetrated against our clients, and the handling of related disputes regarding the use of our products

During 2025, the U.S. housing market continued to be impacted by elevated mortgage rates, including 30-year fixed-rate mortgages that more than doubled from 2021. In addition, while U.S. home prices have experienced meaningful appreciation over the past several years and remained generally stable in 2025, there has been some regional dispersion in Bank of America 12 Bank of America 12 Bank of America 12 Bank of America 12 housing prices since the beginning of 2025, which we have been closely monitoring. These trends have negatively impacted housing affordability generally, and therefore the demand for some of our products. A downturn in the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably our held-for-investment residential mortgage and home equity portfolio. If the U.S. housing market weakens and real estate values decline, we could experience increased credit losses and delinquent servicing expenses, negatively affecting our allowance for credit losses and representations and warranties exposures, and adversely affecting our results of operations and financial condition.Our derivatives businesses may expose us to unexpected risks, which may result in losses and adversely affect liquidity.We are party to a large number of derivatives transactions that may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Fluctuations in asset values or rates or an unanticipated credit event, including unforeseen circumstances that may cause previously uncorrelated factors to become correlated, may lead to losses resulting from risks not taken into account or anticipated in the development, structuring or pricing of a derivative instrument. Certain derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change to our or our affiliates’ credit ratings, we may be required to provide additional collateral or take other remedial actions, and we could experience increased difficulty obtaining funding or hedging risks. In some cases our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements upon the occurrence of such events.We are also a member of various CCPs, which results in credit risk exposure to those CCPs. In the event that one or more members of a CCP defaults on their obligations, we may be required to pay a portion of any losses incurred by such CCP. A CCP may also, at its discretion, modify the margin we are required to post, which could mean unexpected and increased funding costs and exposure to that CCP. As a clearing member, we are exposed to the risk of non-performance by our clients for which we clear transactions, which may not be covered by available collateral. Also, default by a significant market participant may result in further risk and potential losses.GeopoliticalWe are subject to numerous political, economic, market, reputational, operational, compliance, legal, regulatory and other risks in the jurisdictions in which we operate.We do business globally, including in emerging markets. Economic or geopolitical stress in one or more countries could have a negative impact regionally or globally, resulting in, among other things, market volatility, valuation declines and declines in economic output. Our liquidity and credit risk could be adversely impacted by, and our businesses and revenues derived from non-U.S. jurisdictions are subject to, risk of loss from financial, social or judicial instability, economic sanctions, government leadership changes, including from electoral outcomes or otherwise, governmental or central bank policy changes, expropriation, nationalization and/or confiscation of assets, price controls, high inflation, weather events, natural disasters, widespread health emergencies or pandemics, capital controls, currency re-denomination risk from a country exiting the EU or otherwise, currency fluctuations, foreign exchange controls or movements (caused by devaluation or de-pegging), unfavorable political and diplomatic developments, oil price fluctuations and changes in legislation. These risks are heightened in emerging markets. Political and economic interactions between the U.S. and important trading partners, including China, but also more broadly across Asia, Europe, Latin America and North America, have become increasingly fragmented and complex and may result in sanctions, further tariff increases or other restrictive actions on cross-border trade, investment and transfer of data and information technology. Such actions, which may also include actions taken against other countries to enforce trade restrictions, could reduce trade volumes, result in supply chain disruptions, increase costs for producers, and adversely affect our businesses and revenues, as well as our clients and counterparties, including their credit quality.Slowing growth, recessionary conditions, adverse geopolitical conditions and political or civil unrest, foreign trade competition, employment levels, wage pressures and elevated inflation in certain countries may pose challenges, including from volatility in financial markets. Foreign exchange rates against the U.S. dollar remain uncertain and potentially volatile, and depreciation could increase our financial risks with clients that deal in non-U.S. currencies but have U.S. dollar-denominated debt.We 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 markets, are generally smaller, less liquid and more volatile than U.S. trading markets. Risks in one nation can limit our opportunities for portfolio growth and negatively affect our operations in other nations, including our U.S. operations. Market and economic disruptions may affect consumer confidence levels and spending, corporate investment and job creation, bankruptcy rates, levels of incurrence and default on consumer and corporate debt, economic growth rates and asset values, among other factors.Elevated government debt levels raise the risk of volatility, significant valuation changes and political tensions regarding fiscal policy or defaults on or devaluation of sovereign debt, all of which could expose us to substantial losses. Financial markets have been and may continue to be sensitive to government budget processes and changes to fiscal policy, as well as any resulting political turmoil.Our non-U.S. businesses are also subject to extensive regulation by governments, securities exchanges and regulators, central banks and other regulatory bodies. In many countries, the LRRs applicable to the financial services and securities industries are less predictable, prone to change and uncertainty, regularly evolving and may conflict with similar LRRs in the U.S. We spend significant resources on understanding and monitoring foreign LRRs, some with less predictable legal and regulatory frameworks, as well as managing our relationships with multiple regulators in various jurisdictions. Failure to comply with local laws and manage our relationships with regulators could result in increased expenses, changes to our organizational structure and adversely affect our businesses, reputation and results of operations in that market.We are also subject to complex and extensive U.S. and non-U.S. LRRs, which subject us to costs and risks relating to bribery and corruption, know-your-customer requirements, anti-money laundering, embargo programs and economic sanctions, which can vary or conflict across jurisdictions. These LRRs require implementation of complex operational capabilities and compliance programs. Claims regarding non-compliance, housing prices since the beginning of 2025, which we have been closely monitoring. These trends have negatively impacted housing affordability generally, and therefore the demand for some of our products. A downturn in the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably our held-for-investment residential mortgage and home equity portfolio. If the U.S. housing market weakens and real estate values decline, we could experience increased credit losses and delinquent servicing expenses, negatively affecting our allowance for credit losses and representations and warranties exposures, and adversely affecting our results of operations and financial condition.Our derivatives businesses may expose us to unexpected risks, which may result in losses and adversely affect liquidity.We are party to a large number of derivatives transactions that may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Fluctuations in asset values or rates or an unanticipated credit event, including unforeseen circumstances that may cause previously uncorrelated factors to become correlated, may lead to losses resulting from risks not taken into account or anticipated in the development, structuring or pricing of a derivative instrument. Certain derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change to our or our affiliates’ credit ratings, we may be required to provide additional collateral or take other remedial actions, and we could experience increased difficulty obtaining funding or hedging risks. In some cases our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements upon the occurrence of such events.We are also a member of various CCPs, which results in credit risk exposure to those CCPs. In the event that one or more members of a CCP defaults on their obligations, we may be required to pay a portion of any losses incurred by such CCP. A CCP may also, at its discretion, modify the margin we are required to post, which could mean unexpected and increased funding costs and exposure to that CCP. As a clearing member, we are exposed to the risk of non-performance by our clients for which we clear transactions, which may not be covered by available collateral. Also, default by a significant market participant may result in further risk and potential losses.GeopoliticalWe are subject to numerous political, economic, market, reputational, operational, compliance, legal, regulatory and other risks in the jurisdictions in which we operate.We do business globally, including in emerging markets. Economic or geopolitical stress in one or more countries could have a negative impact regionally or globally, resulting in, among other things, market volatility, valuation declines and declines in economic output. Our liquidity and credit risk could be adversely impacted by, and our businesses and revenues derived from non-U.S. jurisdictions are subject to, risk of loss from financial, social or judicial instability, economic sanctions, government leadership changes, including from electoral outcomes or otherwise, governmental or central bank policy changes, expropriation, nationalization and/or confiscation of assets, price controls, high inflation, weather events, natural disasters, widespread health emergencies or pandemics, capital controls, currency re-denomination risk from a country exiting the EU or otherwise, currency fluctuations, foreign exchange controls or movements (caused by devaluation or de-pegging), unfavorable political and diplomatic developments, oil price fluctuations and housing prices since the beginning of 2025, which we have been closely monitoring. These trends have negatively impacted housing affordability generally, and therefore the demand for some of our products. A downturn in the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably our held-for-investment residential mortgage and home equity portfolio. If the U.S. housing market weakens and real estate values decline, we could experience increased credit losses and delinquent servicing expenses, negatively affecting our allowance for credit losses and representations and warranties exposures, and adversely affecting our results of operations and financial condition.

During 2024, the U.S. housing market continued to be impacted by higher mortgage rates, including 30-year fixed-rate mortgages that more than doubled from 2021, and higher home prices (in varying degrees among markets) that have negatively impacted housing affordability and the demand for many of our products. Also, our mortgage loan production volume is generally influenced by the rate of growth in residential Bank of America 12 Bank of America 12 Bank of America 12 Bank of America 12 mortgage debt outstanding and the size of the residential mortgage market, both of which have slowed due to higher interest rates and reduced affordability. A deeper downturn in the condition of the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably mortgage-backed securities (MBS). If the U.S. housing market were to further weaken, the value of real estate could decline, which could result in increased credit losses and delinquent servicing expenses, negatively affect our representations and warranties exposures, and adversely affect our results of operations and financial condition.Our derivatives businesses may expose us to unexpected risks, which may result in losses and adversely affect liquidity.We are party to a large number of derivatives transactions that may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Fluctuations in asset values or rates or an unanticipated credit event, including unforeseen circumstances that may cause previously uncorrelated factors to become correlated, may lead to losses resulting from risks not taken into account or anticipated in the development, structuring or pricing of a derivative instrument. Certain derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change to our or our affiliates’ credit ratings, we may be required to provide additional collateral or take other remedial actions, and we could experience increased difficulty obtaining funding or hedging risks. In some cases our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements upon the occurrence of such events.We are also a member of various CCPs, which results in credit risk exposure to those CCPs. In the event that one or more members of a CCP defaults on their obligations, we may be required to pay a portion of any losses incurred by such CCP. A CCP may also, at its discretion, modify the margin we are required to post, which could mean unexpected and increased funding costs and exposure to that CCP. As a clearing member, we are exposed to the risk of non-performance by our clients for which we clear transactions, which may not be covered by available collateral. Also, default by a significant market participant may result in further risk and potential losses.GeopoliticalWe are subject to numerous political, economic, market, reputational, operational, compliance, legal, regulatory and other risks in the jurisdictions in which we operate.We do business throughout the world, including in emerging markets. Economic or geopolitical stress in one or more countries could have a negative impact regionally or globally, resulting in, among other things, market volatility, reduced market value and economic output. Our liquidity and credit risk could be adversely impacted by, and our businesses and revenues derived from non-U.S. jurisdictions are subject to, risk of loss from financial, social or judicial instability, economic sanctions, changes in government leadership, including from electoral outcomes or otherwise, changes in governmental or central bank policies, expropriation, nationalization and/or confiscation of assets, price controls, high inflation, natural disasters, the emergence of widespread health emergencies or pandemics, capital controls, currency re-denomination risk from a country exiting the EU or otherwise, currency fluctuations, foreign exchange controls or movements (caused by devaluation or de-pegging), unfavorable political and diplomatic developments, oil price fluctuations and changes in legislation. These risks are especially elevated in emerging markets.Political and economic interactions between the U.S. and important trading partners, including China, but also more broadly across the EU, Latin America and Canada, may result in sanctions, further tariff increases or other restrictive actions on cross-border trade, investment and transfer of data and information technology. Such actions, which may also include actions taken against other countries to enforce trade restrictions, could reduce trade volumes, result in further supply chain disruptions, increase costs for producers, and adversely affect our businesses and revenues, as well as our clients and counterparties, including their credit quality.Slowing growth, recessionary conditions, adverse geopolitical conditions and political or civil unrest, foreign trade competition, labor shortages, wage pressures and elevated inflation in certain countries pose challenges, including from volatility in financial markets. Foreign exchange rates against the U.S. dollar remain uncertain and potentially volatile, and depreciation could increase our financial risks with clients that deal in non-U.S. currencies but have U.S. dollar-denominated debt.We 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 markets, are generally smaller, less liquid and more volatile than U.S. trading markets. Risks in one nation can limit our opportunities for portfolio growth and negatively affect our operations in other nations, including our U.S. operations. Market and economic disruptions may affect consumer confidence levels and spending, corporate investment and job creation, bankruptcy rates, levels of incurrence and default on consumer and corporate debt, economic growth rates and asset values, among other factors.Elevated government debt levels raise the risk of volatility, significant valuation changes and political tensions regarding fiscal policy or defaults on or devaluation of sovereign debt, all of which could expose us to substantial losses. Financial markets have been and may continue to be sensitive to government budget processes and changes to fiscal policy, as well as any resulting political turmoil.Our non-U.S. businesses are also subject to extensive regulation by governments, securities exchanges and regulators, central banks and other regulatory bodies. In many countries, the laws and regulations applicable to the financial services and securities industries are less predictable, prone to change and uncertainty, and regularly evolving. Significant resources are spent on determining, understanding and monitoring foreign LRRs, some with less predictable legal and regulatory frameworks, as well as managing our relationships with multiple regulators in various jurisdictions. Our inability to remain in compliance with local laws and manage our relationships with regulators could result in increased expenses, changes to our organizational structure and adversely affect our businesses, reputation and results of operations in that market.We are also subject to complex and extensive U.S. and non-U.S. LRRs, which subject us to costs and risks relating to bribery and corruption, know-your-customer requirements, anti-money laundering, embargo programs and economic sanctions, which can vary by jurisdiction and require implementation of complex operational capabilities and compliance programs. Non-compliance, including improper implementation, and/or violations could result in an increase in operational and compliance costs, and enforcement actions and civil and criminal penalties against us and individual employees. The mortgage debt outstanding and the size of the residential mortgage market, both of which have slowed due to higher interest rates and reduced affordability. A deeper downturn in the condition of the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably mortgage-backed securities (MBS). If the U.S. housing market were to further weaken, the value of real estate could decline, which could result in increased credit losses and delinquent servicing expenses, negatively affect our representations and warranties exposures, and adversely affect our results of operations and financial condition.Our derivatives businesses may expose us to unexpected risks, which may result in losses and adversely affect liquidity.We are party to a large number of derivatives transactions that may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Fluctuations in asset values or rates or an unanticipated credit event, including unforeseen circumstances that may cause previously uncorrelated factors to become correlated, may lead to losses resulting from risks not taken into account or anticipated in the development, structuring or pricing of a derivative instrument. Certain derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change to our or our affiliates’ credit ratings, we may be required to provide additional collateral or take other remedial actions, and we could experience increased difficulty obtaining funding or hedging risks. In some cases our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements upon the occurrence of such events.We are also a member of various CCPs, which results in credit risk exposure to those CCPs. In the event that one or more members of a CCP defaults on their obligations, we may be required to pay a portion of any losses incurred by such CCP. A CCP may also, at its discretion, modify the margin we are required to post, which could mean unexpected and increased funding costs and exposure to that CCP. As a clearing member, we are exposed to the risk of non-performance by our clients for which we clear transactions, which may not be covered by available collateral. Also, default by a significant market participant may result in further risk and potential losses.GeopoliticalWe are subject to numerous political, economic, market, reputational, operational, compliance, legal, regulatory and other risks in the jurisdictions in which we operate.We do business throughout the world, including in emerging markets. Economic or geopolitical stress in one or more countries could have a negative impact regionally or globally, resulting in, among other things, market volatility, reduced market value and economic output. Our liquidity and credit risk could be adversely impacted by, and our businesses and revenues derived from non-U.S. jurisdictions are subject to, risk of loss from financial, social or judicial instability, economic sanctions, changes in government leadership, including from electoral outcomes or otherwise, changes in governmental or central bank policies, expropriation, nationalization and/or confiscation of assets, price controls, high inflation, natural disasters, the emergence of widespread health emergencies or pandemics, capital controls, currency re-denomination risk from a country exiting the EU or otherwise, currency fluctuations, foreign exchange controls or movements (caused by devaluation or de-pegging), unfavorable political and diplomatic developments, oil price fluctuations and changes in legislation. These risks are especially elevated in emerging markets. mortgage debt outstanding and the size of the residential mortgage market, both of which have slowed due to higher interest rates and reduced affordability. A deeper downturn in the condition of the U.S. housing market could result in significant write-downs of asset values in several asset classes, notably mortgage-backed securities (MBS). If the U.S. housing market were to further weaken, the value of real estate could decline, which could result in increased credit losses and delinquent servicing expenses, negatively affect our representations and warranties exposures, and adversely affect our results of operations and financial condition.

We face significant legal risks in our business, with a high volume of claims against us, including related to various products, services and markets. The amount of damages, penalties and fines that private litigants, including clients and other counterparties, and regulators seek from us and other financial institutions continues to be significant and unpredictable. U.S. federal and state regulators and government agencies, state attorneys general and regulators in foreign jurisdictions regularly pursue enforcement claims and litigation against financial institutions, including us, for alleged violations of law and client harm, including under the Financial Institutions Reform, Recovery, and Enforcement Act, the federal securities laws, the False Claims Act, fair lending laws and regulations (e.g., the Equal Credit Opportunity Act and the Fair Housing Act), the FCPA, the BSA, regulations issued by OFAC, Home Mortgage Disclosure Act, antitrust laws, and consumer protection laws and regulations related to products and services such as overdraft and sales practices, including prohibitions on unfair, deceptive, and/or abusive acts and practices (UDAAP) under the Consumer Financial Protection Act and the Federal Trade Bank of America 18 Bank of America 18 Bank of America 18 Bank of America 18 Commission Act, and EFTA, as well as other enforcement action taken by prudential regulators with respect to safety, soundness and appropriateness of our business practices. Such claims may require substantial remediation and carry significant penalties, restitution and, in certain cases, treble damages. The ultimate resolution of regulatory inquiries, investigations and other proceedings which we are subject to is difficult to predict.We and our regulators have an increased focus on privacy, information security and emerging technologies, such as AI. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, which have resulted in, and will likely continue to result in, related litigation (including class actions) or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. The interconnectedness and complexity of AI models may complicate oversight and compliance, and reliance on third‑party AI models further increases our risks due to limited visibility into their training data, methodologies and safeguards. Inaccurate AI outputs, unintended or unauthorized exposure of confidential information, biases and possible infringement of intellectual property rights through the use of AI increase this risk. Also, increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure could result in litigation, regulatory investigations and actions.In addition to the consent order regarding BSA/anti-money laundering and economic sanctions compliance programs, in recent years we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including unemployment benefit processing for California and certain other states. We are, or may become subject to related litigation or investigations by other regulators related to the conduct that resulted in these orders, or orders or investigations we become subject to in the future, which may result in judgments and/or settlements. Also, we may be adversely impacted by matters related to fraud perpetrated against our clients in connection with their use of electronic payments (including Zelle) and other similar products and services, which could result in judgments or settlements, and adversely affect our businesses and strategies.Misconduct, or perceived misconduct, by our employees, third parties and other representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm. For example, we are responding to demands and requests relating to our past or current policies and practices for providing, maintaining or discontinuing financial products or services to certain clients or potential clients, including account opening, underwriting, credit, transaction monitoring or account closure, which could result in litigation or regulatory action.Investigations, regulation, regulatory compliance activities, litigation and regulatory enforcement, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions are often complex and unpredictable, develop over a long period of time and have resulted in and will likely continue to result in injunctive relief and judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of our reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.U.S. federal banking agencies may require increased capital and liquidity levels, which could adversely impact the Corporation.We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, an SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities (e.g., payment of dividends and/or repurchase of common stock). If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted.Also, our ability to pay dividends on or repurchase our common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If our SCB, G-SIB surcharge or countercyclical capital buffer requirements increase, our dividends and common stock repurchases could decrease. For example, our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could increase further in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events.Regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital, RWA or leverage exposure is calculated, and/or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may increase our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold. Changes to and compliance with regulatory capital and liquidity requirements may impact our operations by requiring the liquidation of assets, increased borrowings, issuance of additional securities, reduced common stock repurchases or dividends, limits to compensation practices, ceased or altered operations, modification of pricing strategies and business activities, and/or holding of highly liquid assets.Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing certain Commission Act, and EFTA, as well as other enforcement action taken by prudential regulators with respect to safety, soundness and appropriateness of our business practices. Such claims may require substantial remediation and carry significant penalties, restitution and, in certain cases, treble damages. The ultimate resolution of regulatory inquiries, investigations and other proceedings which we are subject to is difficult to predict.We and our regulators have an increased focus on privacy, information security and emerging technologies, such as AI. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, which have resulted in, and will likely continue to result in, related litigation (including class actions) or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. The interconnectedness and complexity of AI models may complicate oversight and compliance, and reliance on third‑party AI models further increases our risks due to limited visibility into their training data, methodologies and safeguards. Inaccurate AI outputs, unintended or unauthorized exposure of confidential information, biases and possible infringement of intellectual property rights through the use of AI increase this risk. Also, increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure could result in litigation, regulatory investigations and actions.In addition to the consent order regarding BSA/anti-money laundering and economic sanctions compliance programs, in recent years we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including unemployment benefit processing for California and certain other states. We are, or may become subject to related litigation or investigations by other regulators related to the conduct that resulted in these orders, or orders or investigations we become subject to in the future, which may result in judgments and/or settlements. Also, we may be adversely impacted by matters related to fraud perpetrated against our clients in connection with their use of electronic payments (including Zelle) and other similar products and services, which could result in judgments or settlements, and adversely affect our businesses and strategies.Misconduct, or perceived misconduct, by our employees, third parties and other representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm. For example, we are responding to demands and requests relating to our past or current policies and practices for providing, maintaining or discontinuing financial products or services to certain clients or potential clients, including account opening, underwriting, credit, transaction monitoring or account closure, which could result in litigation or regulatory action. Commission Act, and EFTA, as well as other enforcement action taken by prudential regulators with respect to safety, soundness and appropriateness of our business practices. Such claims may require substantial remediation and carry significant penalties, restitution and, in certain cases, treble damages. The ultimate resolution of regulatory inquiries, investigations and other proceedings which we are subject to is difficult to predict. We and our regulators have an increased focus on privacy, information security and emerging technologies, such as AI. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, which have resulted in, and will likely continue to result in, related litigation (including class actions) or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. The interconnectedness and complexity of AI models may complicate oversight and compliance, and reliance on third‑party AI models further increases our risks due to limited visibility into their training data, methodologies and safeguards. Inaccurate AI outputs, unintended or unauthorized exposure of confidential information, biases and possible infringement of intellectual property rights through the use of AI increase this risk. Also, increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure could result in litigation, regulatory investigations and actions. In addition to the consent order regarding BSA/anti-money laundering and economic sanctions compliance programs, in recent years we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including unemployment benefit processing for California and certain other states. We are, or may become subject to related litigation or investigations by other regulators related to the conduct that resulted in these orders, or orders or investigations we become subject to in the future, which may result in judgments and/or settlements. Also, we may be adversely impacted by matters related to fraud perpetrated against our clients in connection with their use of electronic payments (including Zelle) and other similar products and services, which could result in judgments or settlements, and adversely affect our businesses and strategies. Misconduct, or perceived misconduct, by our employees, third parties and other representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm. For example, we are responding to demands and requests relating to our past or current policies and practices for providing, maintaining or discontinuing financial products or services to certain clients or potential clients, including account opening, underwriting, credit, transaction monitoring or account closure, which could result in litigation or regulatory action. Investigations, regulation, regulatory compliance activities, litigation and regulatory enforcement, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions are often complex and unpredictable, develop over a long period of time and have resulted in and will likely continue to result in injunctive relief and judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of our reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.U.S. federal banking agencies may require increased capital and liquidity levels, which could adversely impact the Corporation.We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, an SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities (e.g., payment of dividends and/or repurchase of common stock). If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted.Also, our ability to pay dividends on or repurchase our common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If our SCB, G-SIB surcharge or countercyclical capital buffer requirements increase, our dividends and common stock repurchases could decrease. For example, our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could increase further in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events.Regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital, RWA or leverage exposure is calculated, and/or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may increase our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold. Changes to and compliance with regulatory capital and liquidity requirements may impact our operations by requiring the liquidation of assets, increased borrowings, issuance of additional securities, reduced common stock repurchases or dividends, limits to compensation practices, ceased or altered operations, modification of pricing strategies and business activities, and/or holding of highly liquid assets.Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing certain Investigations, regulation, regulatory compliance activities, litigation and regulatory enforcement, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions are often complex and unpredictable, develop over a long period of time and have resulted in and will likely continue to result in injunctive relief and judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of our reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.

We face significant legal risks in our business, with a high volume of claims against us and other financial institutions, including conduct related to various products, services and markets. The amount of damages, penalties and fines that private litigants, including clients and other counterparties, and regulators seek from us and other financial institutions continues to be significant and unpredictable. U.S. regulators and government agencies regularly pursue enforcement claims and litigation against financial institutions, including us, for alleged violations of law and client harm, including under the Financial Institutions Reform, Recovery, and Enforcement Act, the federal securities laws, the False Claims Act, fair lending laws and regulations (including the Equal Credit Opportunity Act and the Fair Housing Act), the FCPA, the BSA, regulations issued by OFAC, Home Mortgage Disclosure Act, antitrust laws, and consumer protection laws and regulations related to products and services such as overdraft and sales practices, including prohibitions on unfair, deceptive, and/or abusive acts and practices (UDAAP) under the Consumer Financial Protection Act and the Federal Trade Commission Act, and EFTA, as well as other enforcement action taken by prudential regulators with respect to safety, soundness and appropriateness of our business practices. Such claims may carry significant penalties, restitution and, in certain cases, treble damages, and the ultimate resolution of regulatory inquiries, investigations and other proceedings which we are subject to from time-to-time is difficult to predict. In particular, we are the subject of litigation regarding our processing of electronic payments through the Zelle network, Bank of America 18 Bank of America 18 Bank of America 18 Bank of America 18 our efforts to detect, prevent and address fraud perpetrated against our clients and/or the handling of fraud-related disputes, which could result in fines, judgments and/or settlements, and adversely affect our businesses and strategies due to the treatment of loss allocations between clients and us, all of which could also adversely impact other similar products and services. Further, in addition to the consent order referenced above regarding BSA/anti-money laundering and economic sanctions compliance programs, we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including the processing of unemployment benefits for California and certain other states. We are subject to, or could become subject to, related litigation or investigations by other regulators with respect to the conduct that gave rise to these orders, or the orders or investigations we become subject to in the future, which may result in judgments and/or settlements. We and our regulators have an increased focus on information security. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, including AI, which have resulted in, and will likely continue to result in, related litigation or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. We expect to also face increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure, which could result in litigation, regulatory investigations and actions and reputational harm. Misconduct, or the perception of misconduct, by our employees and representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm.The global environment of extensive investigations, regulation, regulatory compliance burdens, litigation and regulatory enforcement, combined with uncertainty related to the continually evolving regulatory environment, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions have resulted in and will likely continue to result in judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.U.S. federal banking agencies may require increased capital and liquidity levels, which could adversely impact the Corporation.We are subject to U.S. capital and liquidity regulations. These rules, among other things, establish minimum ratios relating to capital for different categories of assets and exposures to qualify as a well-capitalized institution. As a G-SIB, we are also required to hold additional capital buffers, including a G-SIB surcharge, a SCB and a countercyclical buffer, which are reassessed at least annually. Also, we are subject to regulatory liquidity requirements, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio. If any of our subsidiary insured depository institutions fail to maintain “well capitalized” status under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status, which may include restrictions on our activities, such as our ability to pay dividends and/or repurchase our common stock. If we were to fail to enter into or comply with such an agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities otherwise permitted. From time to time regulators may change regulatory capital requirements, including total loss-absorbing capacity (TLAC) and long-term debt requirements, change how regulatory capital or RWA is calculated, or increase liquidity requirements. These components of our capital and liquidity ratios could also be impacted by economic disruptions or other events that may cause an increase in our balance sheet, RWA or leverage exposures, which could increase the amounts of regulatory capital or liquidity we are required to hold.In 2023, U.S. banking regulators issued notices of proposed rulemaking to revise the measurement of RWA and the G-SIB surcharge calculation, both of which may be re-proposed. Also, in 2023, U.S. banking regulators issued proposed changes to the long-term debt requirements for TLAC, which may impact eligibility of certain debt instruments, and in 2024, the Federal Reserve separately confirmed it is considering changes to existing, as well as new, liquidity requirements. The timing and composition of any such proposals or re-proposals remain uncertain due to various factors, including changes of leadership positions in the U.S. bank regulatory agencies. Our ability to pay dividends or repurchase common stock depends, in part, on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If increases occur in our SCB, G-SIB surcharge or countercyclical capital buffer, our dividends and common stock repurchases, could decrease. For example, in 2024, our SCB increased by 70 bps to 3.2 percent and our G-SIB surcharge increased 50 bps to 3.0 percent. Our G-SIB surcharge is expected to increase to 3.5 percent from 3.0 percent in 2027, and could further increase in the future. The Federal Reserve could also limit or prohibit capital actions (e.g., impacts to dividends and common stock repurchases) as a result of economic disruptions or events. Extensive regulatory evaluation of our capital planning practices by the Federal Reserve includes stress testing on parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which may impact our SCB level and require us to hold additional capital. In 2024, the Federal Reserve announced that it intends to propose potential changes to bank stress tests, which could impact our SCB. Changes to and compliance with the regulatory capital and liquidity requirements may impact our operations by requiring us to liquidate assets, increase borrowings, issue additional securities, reduce common stock repurchases or dividends, limit compensation practices, cease or alter certain operations, pricing strategies and business activities or hold highly liquid assets, adversely affecting our results of operations. our efforts to detect, prevent and address fraud perpetrated against our clients and/or the handling of fraud-related disputes, which could result in fines, judgments and/or settlements, and adversely affect our businesses and strategies due to the treatment of loss allocations between clients and us, all of which could also adversely impact other similar products and services. Further, in addition to the consent order referenced above regarding BSA/anti-money laundering and economic sanctions compliance programs, we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including the processing of unemployment benefits for California and certain other states. We are subject to, or could become subject to, related litigation or investigations by other regulators with respect to the conduct that gave rise to these orders, or the orders or investigations we become subject to in the future, which may result in judgments and/or settlements. We and our regulators have an increased focus on information security. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, including AI, which have resulted in, and will likely continue to result in, related litigation or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. We expect to also face increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure, which could result in litigation, regulatory investigations and actions and reputational harm. Misconduct, or the perception of misconduct, by our employees and representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm.The global environment of extensive investigations, regulation, regulatory compliance burdens, litigation and regulatory enforcement, combined with uncertainty related to the continually evolving regulatory environment, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions have resulted in and will likely continue to result in judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.U.S. federal banking agencies may require increased capital and liquidity levels, which could adversely impact the Corporation. our efforts to detect, prevent and address fraud perpetrated against our clients and/or the handling of fraud-related disputes, which could result in fines, judgments and/or settlements, and adversely affect our businesses and strategies due to the treatment of loss allocations between clients and us, all of which could also adversely impact other similar products and services. Further, in addition to the consent order referenced above regarding BSA/anti-money laundering and economic sanctions compliance programs, we have entered into orders or settlements with certain government agencies regarding the rates paid on uninvested cash in brokerage and investment advisory accounts that is swept into interest-paying bank deposits, credit card sales and marketing practices and representment fee practices and our participation in implementing COVID-19-related government relief measures and other federal and state government assistance programs, including the processing of unemployment benefits for California and certain other states. We are subject to, or could become subject to, related litigation or investigations by other regulators with respect to the conduct that gave rise to these orders, or the orders or investigations we become subject to in the future, which may result in judgments and/or settlements. We and our regulators have an increased focus on information security. This includes cybersecurity incidents perpetrated against us, our clients, providers of products and services, counterparties and other third parties, the collection, use and sharing of data, and safeguarding of personally identifiable information and corporate data, as well as the development, implementation, use and management of emerging technologies, including AI, which have resulted in, and will likely continue to result in, related litigation or government enforcement, including with regard to compliance with U.S. and global LRRs, and could subject us to fines, judgments and/or settlements and involve reputational losses. We expect to also face increasing scrutiny regarding sustainability-related policies, goals, targets and disclosure, which could result in litigation, regulatory investigations and actions and reputational harm. Misconduct, or the perception of misconduct, by our employees and representatives, including conflicts of interest, unethical, fraudulent, improper or illegal conduct, the failure to fulfill fiduciary obligations, unfair, deceptive, abusive or discriminatory business practices, or violations of policies, procedures or LRRs, including conduct that affects compliance with books and records requirements, have resulted and could result in further litigation and/or government investigations and enforcement actions, and cause significant reputational harm. The global environment of extensive investigations, regulation, regulatory compliance burdens, litigation and regulatory enforcement, combined with uncertainty related to the continually evolving regulatory environment, have affected and are likely to continue to affect operational and compliance costs and risks, including the adaptation of business strategies, the limitation or cessation of our ability or feasibility to continue providing certain products and services and our employment practices. Lawsuits and regulatory actions have resulted in and will likely continue to result in judgments, orders, settlements, penalties and fines adverse to us, in amounts that may be significant or unpredictable, and in some cases, exceed the amount of reserves established. Litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could adversely affect our businesses, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm.

We rely on a diversified mix of businesses that deliver a broad range of financial products and services through multiple distribution channels. Our success depends on our and our third-party providers’ ability to timely change or adapt our business strategies, products and services and their respective features, including available payment processing services and technology, including AI, to rapidly evolving industry standards and consumer preferences. Our strategies could be further impacted by macroeconomic stress, widespread health emergencies or pandemics, cyberattacks, and military conflicts or other significant geopolitical events.Widespread adoption and rapid evolution of, as well as developments in the regulatory landscape relating to emerging technologies, including analytic capabilities, AI, automated decision-making, self-service digital trading platforms and automated trading markets, internet services, and digital assets (e.g., cryptocurrencies, stablecoins, tokens and other crypto assets) as well as payment, clearing and settlement processes that use distributed ledger technology, create additional strategic risks, could negatively impact our ability to compete and require substantial expenditures to the extent we were to modify or adapt our existing products and services. Also, our ability to offer certain products and services may be impacted by legal or regulatory considerations. As new technologies evolve and mature, including the further development of the nonbank digital asset ecosystem (e.g., related to nonbank stablecoins or digital asset trading), and new competitors to the payments and trading ecosystems emerge and current competitors adapt, our businesses and results of operations could be adversely impacted, and we could experience increased volatility in deposits and/or significant long-term reduction in deposits (i.e., financial disintermediation).Also, we may not be timely or successful in assessing competition, developing, introducing or integrating new products and services, responding, managing or adapting to changes in consumer behavior, preferences, spending, investing or saving habits, achieving market acceptance of our products and services, reducing costs of our products and services in response to pricing pressures or developing and maintaining clients. Our businesses may be negatively impacted if we, or our third-party providers, do not timely develop and apply emerging technologies, such as AI and quantum computing, or if our initiatives in these areas are deficient or fail, or do not achieve the financial benefits anticipated. Our third-party providers’ inability or resistance to timely innovate or adapt operations, products and services to evolving regulatory and market environments, industry standards and consumer preferences could result in service disruptions, harm our business and adversely affect our results of operations and reputation.We could suffer operational, reputational and financial harm if our models fail to properly anticipate and manage risk.We use models enterprise-wide, including to forecast losses, project revenue and expenses, assess and control our operations and financial condition, assist in capital planning, manage liquidity and measure, forecast and assess capital and liquidity requirements for credit, market, operational and strategic risks. Under our Enterprise Model Risk Policy, Model Risk Management is required to perform end-to-end model oversight, including independent validation before initial use, implementation monitoring, ongoing monitoring reviews through outcomes analysis and benchmarking, and periodic revalidation. However, models are inherently limited by simplifying assumptions, uncertainty in economic and financial outcomes, and emerging risks, including from applications that rely on AI.Our models may not be sufficiently predictive of future results, including from limited historical patterns, extreme or unanticipated market movements or clients’ behavior and distribution channels. Our success depends on our and our third-party providers’ ability to timely change or adapt our business strategies, products and services and their respective features, including available payment processing services and technology, including AI, to rapidly evolving industry standards and consumer preferences. Our strategies could be further impacted by macroeconomic stress, widespread health emergencies or pandemics, cyberattacks, and military conflicts or other significant geopolitical events. Widespread adoption and rapid evolution of, as well as developments in the regulatory landscape relating to emerging technologies, including analytic capabilities, AI, automated decision-making, self-service digital trading platforms and automated trading markets, internet services, and digital assets (e.g., cryptocurrencies, stablecoins, tokens and other crypto assets) as well as payment, clearing and settlement processes that use distributed ledger technology, create additional strategic risks, could negatively impact our ability to compete and require substantial expenditures to the extent we were to modify or adapt our existing products and services. Also, our ability to offer certain products and services may be impacted by legal or regulatory considerations. As new technologies evolve and mature, including the further development of the nonbank digital asset ecosystem (e.g., related to nonbank stablecoins or digital asset trading), and new competitors to the payments and trading ecosystems emerge and current competitors adapt, our businesses and results of operations could be adversely impacted, and we could experience increased volatility in deposits and/or significant long-term reduction in deposits (i.e., financial disintermediation). Also, we may not be timely or successful in assessing competition, developing, introducing or integrating new products and services, responding, managing or adapting to changes in consumer behavior, preferences, spending, investing or saving habits, achieving market acceptance of our products and services, reducing costs of our products and services in response to pricing pressures or developing and maintaining clients. Our businesses may be negatively impacted if we, or our third-party providers, do not timely develop and apply emerging technologies, such as AI and quantum computing, or if our initiatives in these areas are deficient or fail, or do not achieve the financial benefits anticipated. Our third-party providers’ inability or resistance to timely innovate or adapt operations, products and services to evolving regulatory and market environments, industry standards and consumer preferences could result in service disruptions, harm our business and adversely affect our results of operations and reputation.

We rely on a diversified mix of businesses that deliver a broad range of financial products and services through multiple distribution channels. Our success depends on our and our third-party providers’ ability to timely change or adapt our business strategies, products and services and their respective features, including available payment processing services and technology, such as AI and machine learning, to rapidly evolving industry standards and consumer preferences. Our strategies could be further impacted by macroeconomic stress, widespread health emergencies or pandemics, cyberattacks, and military conflicts or other significant geopolitical events.Widespread adoption and rapid evolution of, as well as developments in the regulatory landscape relating to emerging technologies, including analytic capabilities, AI (including machine learning and generative AI), automated decision-making, self-service digital trading platforms and automated trading markets, internet services, and digital assets, such as central bank digital currencies, cryptocurrencies (including stablecoins), tokens and other cryptoassets that utilize distributed ledger technology (DLT), as well as payment, clearing and settlement processes that use DLT, create additional strategic risks, could negatively impact our ability to compete and require substantial expenditures to the extent we were to modify or adapt our existing products and services. As new technologies evolve and mature, our businesses and results of operations could be adversely impacted, including as a result of new competitors to the payments and trading ecosystems and increased volatility in deposits and/or significant long-term reduction in deposits (i.e., financial disintermediation). Also, we may not be as timely or successful in assessing the competitive landscape and developing or introducing new products and services, integrating new products or services into our existing offerings, responding, managing or adapting to changes in consumer behavior, preferences, spending, investing and/or saving habits, achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products and services at lower prices or sufficiently developing and maintaining clients. Further, our businesses may be negatively impacted if we, or our third-party providers, do not timely development and apply emerging technologies, like AI and quantum computing, or if our initiatives in these areas are deficient or fail. Our or our third-party providers’ inability or resistance to timely innovate or adapt operations, products and services to evolving regulatory and market environments, industry standards and consumer preferences could result in service disruptions, harm our business and adversely affect our results of operations and reputation.We could suffer operational, reputational and financial harm if our models fail to properly anticipate and manage risk.We use models enterprise-wide, including to forecast losses, project revenue and expenses, assess and control our operations and financial condition, assist in capital planning, manage liquidity and measure, forecast and assess capital and liquidity requirements for credit, market, operational and strategic risks. Under our Enterprise Model Risk Policy, Model Risk Management is required to perform end-to-end model oversight, including independent validation before initial use, implementation monitoring, ongoing monitoring reviews through outcomes analysis and benchmarking, and periodic revalidation. However, models are subject to inherent limitations from simplifying assumptions, uncertainty regarding economic and financial outcomes, and emerging risks, including from applications that rely on AI.Our models may not be sufficiently predictive of future results, such as due to limited historical patterns, extreme or unanticipated market movements or clients’ behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events), which could limit their effectiveness and require timely recalibration. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of the next downturn and would magnify the limitations inherent in using historical data to widespread health emergencies or pandemics, cyberattacks, and military conflicts or other significant geopolitical events. Widespread adoption and rapid evolution of, as well as developments in the regulatory landscape relating to emerging technologies, including analytic capabilities, AI (including machine learning and generative AI), automated decision-making, self-service digital trading platforms and automated trading markets, internet services, and digital assets, such as central bank digital currencies, cryptocurrencies (including stablecoins), tokens and other cryptoassets that utilize distributed ledger technology (DLT), as well as payment, clearing and settlement processes that use DLT, create additional strategic risks, could negatively impact our ability to compete and require substantial expenditures to the extent we were to modify or adapt our existing products and services. As new technologies evolve and mature, our businesses and results of operations could be adversely impacted, including as a result of new competitors to the payments and trading ecosystems and increased volatility in deposits and/or significant long-term reduction in deposits (i.e., financial disintermediation). Also, we may not be as timely or successful in assessing the competitive landscape and developing or introducing new products and services, integrating new products or services into our existing offerings, responding, managing or adapting to changes in consumer behavior, preferences, spending, investing and/or saving habits, achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products and services at lower prices or sufficiently developing and maintaining clients. Further, our businesses may be negatively impacted if we, or our third-party providers, do not timely development and apply emerging technologies, like AI and quantum computing, or if our initiatives in these areas are deficient or fail. Our or our third-party providers’ inability or resistance to timely innovate or adapt operations, products and services to evolving regulatory and market environments, industry standards and consumer preferences could result in service disruptions, harm our business and adversely affect our results of operations and reputation.

Climate-related matters present short-, medium- and long-term risks. This includes physical risks such as extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic risks such as rising average global temperatures and sea levels. These events could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt our operations or those of our clients or third parties, disrupt supply chains or distribution networks, damage collateral and/or result in market volatility, cause rapid deposit outflows, drawdowns of credit facilities or insurance shortfalls, or deteriorate the value of collateral. We also face transition risk associated with the shift to a low-carbon economy. Changes in consumer preferences, market pressures, technology advancements and additional legislation, regulatory, compliance and legal requirements could alter our strategic planning, limit certain business activities and products and services offered, amplify credit and market risks, negatively impact asset values, insurance availability and cost, require capital expenditures and changes in technology and markets, increase expenses and adversely impact our capital requirements and results of operations. Climate-related regulatory approaches and disclosure continue to evolve and diverge across jurisdictions (including the availability of certain reporting exemptions), including among the U.S. and non-U.S., and within the U.S., which could adversely impact our legal, compliance and public disclosure risks and costs. Availability, quality and disclosure of climate-related data, including from third parties, remain challenging, which may result in legal, compliance and/or reputational harm.Our climate-related strategies, policies, and disclosures, which may evolve over time, our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Divergent stakeholder perspectives increase the likelihood that any action or inaction we take regarding climate-related matters will be perceived negatively, which could adversely impact our reputation and businesses. Achieving our climate-related goals and targets, including our goals to achieve net zero greenhouse gas (GHG) emissions before 2050 in our financing activities, operations and supply chain, our interim 2030 GHG targets, including financed emissions, and our sustainable finance goals, are subject to risks and uncertainties, many outside of our control, such as technological advances, clearly defined industry sector roadmaps, public policies, better emissions data reporting and engagement with clients, suppliers, investors, government officials and other stakeholders. Climate-related risks continue to evolve and are difficult to predict, identify, monitor and effectively mitigate, and could adversely affect us.Our ability to attract, develop and retain qualified employees is critical to our success, business prospects and competitive position.Our performance and competitive position is heavily dependent on the talents, development and efforts of highly skilled individuals. Competition for qualified personnel is intense from within and outside the financial services industry. Our competitors include global institutions and institutions subject to different compensation and hiring regulations than those imposed on us. Also, our ability to attract, develop and retain employees could be impacted by our reputation, professional and development opportunities, changes in regulation or enforcement practices, changes in workforce concerns, expectations, practices and preferences (e.g. remote work), and increasing labor shortages and competition for labor, which could increase labor costs.We must provide market-level compensation to attract and retain qualified personnel. As a large financial and banking institution, we are and may become subject to additional limitations on compensation practices by the Federal Reserve, the OCC, the FDIC and other global regulators, which may not affect our competitors. Also, because a substantial portion of compensation paid to many of our employees is equity-based awards based on the value of our common stock, declines in our profitability or outlook could adversely affect the ability to attract and retain employees. If we are unable to continue to attract, develop and retain qualified individuals, our business prospects and competitive position could be adversely affected. regulatory, compliance and legal requirements could alter our strategic planning, limit certain business activities and products and services offered, amplify credit and market risks, negatively impact asset values, insurance availability and cost, require capital expenditures and changes in technology and markets, increase expenses and adversely impact our capital requirements and results of operations. Climate-related regulatory approaches and disclosure continue to evolve and diverge across jurisdictions (including the availability of certain reporting exemptions), including among the U.S. and non-U.S., and within the U.S., which could adversely impact our legal, compliance and public disclosure risks and costs. Availability, quality and disclosure of climate-related data, including from third parties, remain challenging, which may result in legal, compliance and/or reputational harm. Our climate-related strategies, policies, and disclosures, which may evolve over time, our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Divergent stakeholder perspectives increase the likelihood that any action or inaction we take regarding climate-related matters will be perceived negatively, which could adversely impact our reputation and businesses. Achieving our climate-related goals and targets, including our goals to achieve net zero greenhouse gas (GHG) emissions before 2050 in our financing activities, operations and supply chain, our interim 2030 GHG targets, including financed emissions, and our sustainable finance goals, are subject to risks and uncertainties, many outside of our control, such as technological advances, clearly defined industry sector roadmaps, public policies, better emissions data reporting and engagement with clients, suppliers, investors, government officials and other stakeholders. Climate-related risks continue to evolve and are difficult to predict, identify, monitor and effectively mitigate, and could adversely affect us.

Climate change and related environmental sustainability matters present short-, medium- and long-term risks. The physical risks include an increase in the frequency and severity of extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados, and chronic longer-term shifts such as rising average global temperatures and sea levels. Such disasters and effects could adversely impact our facilities, employees and clients’ ability to repay outstanding loans, disrupt the operations of us and our clients or third parties, cause supply chain or distribution network disruptions, damage collateral and/or result in market volatility, rapid deposit outflows or drawdowns of credit facilities, the deterioration of the value of collateral or insurance shortfalls. There is also increasing risk related to the transition to a low-carbon economy. Changes in consumer preferences or financial condition of our clients and counterparties, market pressures, advancements in technology and additional legislation, regulatory, compliance and legal requirements could alter our strategic planning and the scope of our existing businesses, limit our ability to pursue certain business activities and offer certain products and services, amplify credit and market risks, negatively impact asset values, require capital expenditures and changes in technology and markets, including supply chain and insurance availability and cost, increase expenses and adversely impact our capital requirements and results of operations. Particularly, there is a global regulatory focus on climate change and existing and pending disclosure requirements in various jurisdictions, with jurisdictional divergence, which is expected to impact our legal, compliance and public disclosure risks and costs.Our climate change strategies, policies, and disclosures, which may evolve over time, our ability to achieve our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Due to divergent views of stakeholders, we are at increased risk that any action, or lack thereof, by us concerning our response to climate change will be perceived negatively by some stakeholders, which could adversely impact our reputation and businesses. Our ability to meet our climate-related goals and targets, including our goal to achieve certain greenhouse gas (GHG) emissions targets by 2030 and net zero GHG emissions in our financing activities, operations and supply chain before 2050, is subject to risks and uncertainties, many of which are outside of our control, such as technological advances, clearly defined roadmaps for industry sectors, public policies and better emissions data reporting, and ongoing engagement with clients, suppliers, investors, government officials and other stakeholders. Due to the evolving nature of climate-related risks, which are expected to increase over time, it is difficult to predict, identify, monitor and effectively mitigate climate-related risks and uncertainties.Furthermore, there are and will continue to be challenges related to the availability, quality and disclosure of climate-related data, including data obtained from third parties, which may result in legal, compliance and/or reputational harm.Our ability to attract, develop and retain qualified employees is critical to our success, business prospects and competitive position.Our performance and competitive position is heavily dependent on the talents, development and efforts of highly skilled individuals. Competition for qualified personnel is intense from within and outside the financial services industry. Our competitors include global institutions and institutions subject to different compensation and hiring regulations than those imposed on us. Also, our ability to attract, develop and retain employees could be impacted by our reputation, professional and development opportunities, changes in regulation or enforcement practices, changes in workforce concerns, expectations, practices and preferences (including remote work), and increasing labor shortages and competition for labor, which could increase labor costs. We must provide market-level compensation to attract and retain qualified personnel. As a large financial and banking institution, we are and may become subject to additional limitations on compensation practices by the Federal Reserve, the OCC, the FDIC and other global regulators, which may not affect our competitors. Also, because a substantial portion of compensation paid to many of our employees is equity-based awards based on the value of our common stock, declines in our profitability or outlook could adversely affect the ability to attract and retain employees. If we are unable to continue to attract, develop and retain qualified individuals, our business prospects and competitive position could be adversely affected. expenditures and changes in technology and markets, including supply chain and insurance availability and cost, increase expenses and adversely impact our capital requirements and results of operations. Particularly, there is a global regulatory focus on climate change and existing and pending disclosure requirements in various jurisdictions, with jurisdictional divergence, which is expected to impact our legal, compliance and public disclosure risks and costs. Our climate change strategies, policies, and disclosures, which may evolve over time, our ability to achieve our climate-related goals and targets and/or the environmental or climate impacts attributable to our products, services or transactions may impact legal and compliance risk and could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. Due to divergent views of stakeholders, we are at increased risk that any action, or lack thereof, by us concerning our response to climate change will be perceived negatively by some stakeholders, which could adversely impact our reputation and businesses. Our ability to meet our climate-related goals and targets, including our goal to achieve certain greenhouse gas (GHG) emissions targets by 2030 and net zero GHG emissions in our financing activities, operations and supply chain before 2050, is subject to risks and uncertainties, many of which are outside of our control, such as technological advances, clearly defined roadmaps for industry sectors, public policies and better emissions data reporting, and ongoing engagement with clients, suppliers, investors, government officials and other stakeholders. Due to the evolving nature of climate-related risks, which are expected to increase over time, it is difficult to predict, identify, monitor and effectively mitigate climate-related risks and uncertainties. Furthermore, there are and will continue to be challenges related to the availability, quality and disclosure of climate-related data, including data obtained from third parties, which may result in legal, compliance and/or reputational harm.

Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, legal risk, financial risk associated with concentration and climate risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk. Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, control or mitigate risks could result in further legal and regulatory risk and losses and adversely affect our reputation and results of operations.Regulatory, Compliance and LegalWe are highly regulated and subject to evolving government legislation and regulations and certain settlements, orders and agreements with government authorities from time to time.We operate in a highly regulated industry and are subject to evolving and comprehensive federal, state and foreign LRRs and Executive Branch Actions. This significantly affects and has the potential to increase our compliance and operational costs, restrict the scope of our existing businesses, impact potential relationships with our clients, require changes to our employment practices, business strategies, risk management, governance processes and controls and procedures, require us to hold more capital, limit our ability to pursue certain business opportunities, including the products and services we offer, reduce certain fees and rates and/or make our products and services more expensive for our clients. We are also required to file various financial and nonfinancial regulatory reports to comply with LRRs in the jurisdictions in which we operate, which results in additional compliance and operational risk.We continue to adjust our business and operations, legal entity structure, systems, disclosure, policies, procedures, processes, controls and governance, including with regard to capital and liquidity management, risk management and data management, in an effort to comply with LRRs, and evolving expectations, guidance and interpretation by regulatory authorities, including the Department of Treasury (e.g., the Internal Revenue Service (IRS) and OFAC), Financial Crimes Enforcement Network, Federal Reserve, OCC, CFPB, Financial Stability Oversight Council, FDIC, Department of Labor, SEC and CFTC in the U.S., foreign regulators, other government authorities and self-regulatory organizations. We expect to become subject to future LRRs, including beyond those currently proposed, adopted or contemplated in the U.S. or abroad, and evolving interpretations of existing and future LRRs, and may be subject to Executive Branch Actions, which may include FDIC assessments, loss allocations between financial institutions and clients regarding the use of our products and services, including electronic payments, employment practices, fair access to banking products and services, the terms of our products and services and climate and environmental risk management and sustainability reporting and disclosure. LRRs related to emerging technologies, such as AI, cybersecurity and data management, are also rapidly evolving across jurisdictions and could require changes related to deployments and operational processes and increase compliance costs and regulatory, compliance and legal risks.The cumulative effect of all of the current and possible future legislation and regulations, as well as related interpretations, on our litigation and regulatory exposure, businesses, operations, including our ability to compete, and profitability remains uncertain and necessitates that we make certain assumptions with respect to the scope and requirements of existing, prospective and proposed LRRs in our business planning and strategies. If these assumptions prove incorrect, we could be subject to increased regulatory, legal and compliance risks and costs, and potential reputational harm. Also, regulatory initiatives in the U.S. and abroad may overlap, and non-U.S. regulations and initiatives may be inconsistent or conflict with current or proposed U.S. regulations or with each other, which could lead to compliance risks and higher costs.Our regulators’ prudential and supervisory authority gives them broad power and discretion to direct our actions, and they risks could result in further legal and regulatory risk and losses and adversely affect our reputation and results of operations.

Our risk management framework is designed to minimize our risk and loss. We seek to effectively and consistently identify, measure, monitor, report and control the risk types to which we are subject, including the seven key risk types we face. Risks also may span across multiple key risk types, including cybersecurity risk, climate risk, legal risk and concentration risk. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques seeking to balance our ability to profit from trading positions with our exposure to potential losses, we are inherently limited by our ability to identify and measure all risks, including emerging and unknown risks, anticipate the timing and impact of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, identify changes in markets or client behaviors not historically reflected and develop risk management models and forecasts to assess and control risk. Our risk management depends on our ability to consistently execute all elements of our risk management program, develop and maintain a culture of managing risk well throughout the Corporation and manage third-party risks, including providers of products and services, to allow for effective risk management and help confirm that risks are appropriately considered, evaluated and responded to timely. Uncertain economic and geopolitical conditions, widespread health emergencies and pandemics, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, including AI (such as machine learning and generative AI) and quantum computing, accounting, tax and market developments, the failure of employees, representatives and third parties to comply with our policies and Risk Framework and the overall complexity of our operations, among other developments, have in the past and may in the future, result in a heightened level of risk, including operational, reputational and compliance risk. Failure to manage evolving risks or properly anticipate, escalate, manage, control or mitigate risks could result in additional legal, regulatory and reputational risk, losses and adversely affect our results of operations.

We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the 2025 Budget Reconciliation Act. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently enacted or being enacted into law in some OECD countries in which we operate, will impose a 15 percent global minimum tax on certain taxpayers on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material. Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Business model changes impacting profitability and/or adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead management to reassess and/or change its current conclusion that no valuation allowance is necessary for our U.K. net DTA. ReputationDamage to our reputation could harm our businesses, including our competitive position and business prospects.Our ability to attract and retain clients, investors and employees is impacted by our reputation. Reputational harm can arise from various sources that affect public trust, including actual or perceived business activities and activities of our officers, directors, employees, other representatives, clients and third parties, including counterparties, such as fraud, misconduct and unethical behavior, our ability to detect, prevent and/or respond to fraud perpetrated against our clients, and the handling of related disputes regarding the use of our products and services, including electronic payments, effectiveness of our internal controls, the fees charged to our clients, including overdraft and non-sufficient funds fees, compensation practices, lending practices, suitability or reasonableness of particular trading or investment strategies, the services offered to our clients, the reliability of our research and models and prohibiting clients from engaging in certain transactions.Our reputation and business prospects may also be harmed by actual or perceived failure to deliver the products, service standards and quality expected, protect our clients and/or recognize and address client complaints, maintain effective compliance, properly implement technology changes and manage and use of emerging technologies, including AI, maintain effective data management, as well as cybersecurity incidents and information and security breaches affecting us and our employees, clients and third parties, which have occurred and are expected to continue with increasing frequency and severity, prolonged or repeated system outages, our privacy policies, the improper or unintended disclosure of or failure to safeguard personal, proprietary or confidential information, the breach of our fiduciary obligations, employment practices and the handling of widespread health emergencies or pandemics. Our reputation may also be harmed by litigation and/or regulatory matters and their outcomes, and/or criticism or challenges by third parties, relating to the topics discussed above or otherwise. Challenges and/or criticisms to our environmental and social practices, disclosures and benefits of our products, services or transactions, and those of our clients and third parties, including from third parties, who may have diverging views on those practices and disclosures, may also harm our reputation.Perceptions of our liquidity and financial condition, actions by the financial services industry generally, or by certain members or individuals in the industry may harm our reputation. Adverse publicity or negative information, including social media posts by employees, the media or otherwise, whether or not accurate, may trigger a loss of trust or confidence on the part of clients, counterparties, shareholders, investors, debt holders, market analysts, other relevant parties or regulators, adversely impacting our business prospects and results of operations.We are subject to complex and evolving LRRs and interpretations, including regarding fair lending activity, UDAAP, electronic funds transfers, know-your-customer requirements, data protection and privacy (e.g., the GDPR and the CCPA), cross-border data movement and data localization, cybersecurity, the use and development of AI, data and technology and other matters, as well as evolving and expansive interpretations of these LRRs. Principles concerning the appropriate scope of consumer and commercial privacy vary considerably across jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy and data protection remains fluid. Reputation

We could be adversely affected if U.S. and foreign governmental authorities further change tax laws, including changes to the Tax Cuts and Jobs Act of 2017 and Inflation Reduction Act of 2022. Also, new guidelines issued by the Organization for Economic Cooperation and Development (OECD), which are currently being enacted into law in some OECD countries in which we operate, are expected to impose a 15 percent global minimum tax on a country-by-country basis. Any implementation of and/or change in U.S. and foreign tax laws and regulations or interpretations of current or future tax laws and regulations could materially adversely affect our effective tax rate, tax liabilities and results of operations. U.S. and foreign tax laws are complex and our judgments, interpretations or applications of such tax laws could differ from that of the relevant governmental authority. This could result in additional tax liabilities and interest, penalties, the reduction of certain tax benefits and/or the requirement to make adjustments to amounts recorded, which could be material. Also, we have U.K. net deferred tax assets (DTA) which consist primarily of net operating losses that are expected to be realized in a U.K. subsidiary over an extended number of years. Adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of international capital markets or changes in the ability of our U.K. subsidiary to conduct business in the markets outside the U.K., could lead our management to reassess and/or change its current conclusion that no valuation allowance is necessary with respect to our U.K. net DTA. Reputation