Bank of America 2011 Annual Report Download - page 198

196 Bank of America 2011
Corporation typically has the ability to trigger the liquidation of that
trust if the market value of the bonds held in the trust declines
below a specified threshold. This arrangement is designed to limit
market losses to an amount that is less than the customer’s
residual interest, effectively preventing the Corporation from
absorbing losses incurred on assets held within that trust.
During 2011 and 2010, the Corporation was the transferor of
assets into unconsolidated municipal bond trusts and received
cash proceeds from new securitizations of $733 million and $1.2
billion. At December 31, 2011 and 2010, the principal balance
outstanding for unconsolidated municipal bond securitization
trusts for which the Corporation was transferor was $2.5 billion
and $2.2 billion.
The Corporation’s liquidity commitments to unconsolidated
municipal bond trusts, including those for which the Corporation
was transferor, totaled $3.5 billion and $4.0 billion at
December 31, 2011 and 2010. The weighted-average remaining
life of bonds held in the trusts at December 31, 2011 was 10.0
years. There were no material write-downs or downgrades of assets
or issuers during 2011.
Automobile and Other Securitization Trusts
The Corporation transfers automobile and other loans into
securitization trusts, typically to improve liquidity or manage credit
risk. At December 31, 2011, the Corporation serviced assets or
otherwise had continuing involvement with automobile and other
securitization trusts with outstanding balances of $5.8 billion,
including trusts collateralized by automobile loans of $3.9 billion,
student loans of $1.2 billion, and other loans and receivables of
$668 million. At December 31, 2010, the Corporation serviced
assets or otherwise had continuing involvement with automobile
and other securitization trusts with outstanding balances of $10.5
billion, including trusts collateralized by automobile loans of $8.4
billion, student loans of $1.3 billion, and other loans and
receivables of $774 million.
Collateralized Debt Obligation Vehicles
CDO vehicles hold diversified pools of fixed-income securities,
typically corporate debt or ABS, which they fund by issuing multiple
tranches of debt and equity securities. Synthetic CDOs enter into
a portfolio of CDS to synthetically create exposure to fixed-income
securities. CLOs are a subset of CDOs which hold pools of loans,
typically corporate loans or commercial mortgages. CDOs are
typically managed by third-party portfolio managers. The
Corporation transfers assets to these CDOs, holds securities
issued by the CDOs and may be a derivative counterparty to the
CDOs, including a CDS counterparty for synthetic CDOs. The
Corporation has also entered into total return swaps with certain
CDOs whereby the Corporation absorbs the economic returns
generated by specified assets held by the CDO. The Corporation
receives fees for structuring CDOs and providing liquidity support
for super senior tranches of securities issued by certain CDOs.
No third parties provide a significant amount of similar
commitments to these CDOs.
The table below summarizes select information related to CDO
vehicles in which the Corporation held a variable interest at
December 31, 2011 and 2010.
CDO Vehicle VIEs
(Dollars in millions)
Maximum loss exposure
On-balance sheet assets
Trading account assets
Derivative assets
AFS debt securities
All other assets
Total
On-balance sheet liabilities
Derivative liabilities
Long-term debt
Total
Total assets of VIEs
December 31
2011
Consolidated
$ 1,695
$ 1,392
452
—
—
$ 1,844
$—
2,712
$ 2,712
$ 1,844
Unconsolidated
$ 2,272
$ 461
678
—
96
$ 1,235
$11
2
$13
$ 32,903
Total
$ 3,967
$ 1,853
1,130
—
96
$ 3,079
$11
2,714
$ 2,725
$ 34,747
2010
Consolidated
$ 2,971
$ 2,485
207
769
24
$ 3,485
$—
3,162
$ 3,162
$ 3,485
Unconsolidated
$ 3,828
$ 884
890
338
123
$ 2,235
$58
—
$58
$ 43,476
Total
$ 6,799
$ 3,369
1,097
1,107
147
$ 5,720
$58
3,162
$ 3,220
$ 46,961
The Corporation’s maximum loss exposure of $4.0 billion at
December 31, 2011 included $336 million of super senior CDO
exposure, $1.7 billion of exposure to CDO financing facilities and
$2.0 billion of other non-super senior exposure. This exposure is
calculated on a gross basis and does not reflect any benefit from
insurance purchased from third parties. Net of this insurance but
including securities retained from liquidations of CDOs, the
Corporation’s net exposure to super senior CDO-related positions
was $152 million at December 31, 2011. The CDO financing
facilities, which are consolidated, obtain funding from third parties
for CDO positions which are principally classified in trading account
assets on the Corporation’s Consolidated Balance Sheet. The CDO
financing facilities’ long-term debt at December 31, 2011 totaled
$2.6 billion, all of which has recourse to the general credit of the
Corporation. The Corporation’s maximum exposure to loss is
significantly less than the total assets of the CDO vehicles in the
table above because the Corporation typically has exposure to only
a portion of the total assets.
At December 31, 2011, the Corporation had $2.4 billion of
aggregate liquidity exposure to CDOs. This amount included $588
million of commitments to CDOs to provide funding for super senior
exposures and $1.8 billion notional amount of derivative contracts
with unconsolidated VIEs, principally CDO vehicles, which hold non-
super senior CDO debt securities or other debt securities on the
Corporation’s behalf. See Note 14 – Commitments and
Contingencies for additional information. The Corporation’s
liquidity exposure to CDOs at December 31, 2011 is included in
the table above to the extent that the Corporation sponsored the