Bank of America : BofA Securities Europe SA 2021 Annual Report

BofA Securities Europe SA

Pillar 3 Disclosure

As at 31 December 2023

BofA Securities Europe

Pillar 3 Disclosure for the Year Ended 31 December 2023

Contents
1.	Introduction	5
2.	Capital Resources and Minimum Capital Requirement	13
3.	Encumbered and Unencumbered Assets	21
4.	Risk Management, Objectives, and Policy	25
5.	Further Detail on Capital Requirement, Capital Resources, Leverage, Securitisation, and Capital Buffers...	91
6.	Additional Information on Remuneration Disclosure	114
7.	Appendices	116

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BofA Securities Europe

Pillar 3 Disclosure for the Year Ended 31 December 2023

List of Figures & Tables
Figures
Figure 1.1.2.F1. - Summary of BofASE's Key Metrics as at 31 December 2023	6
Figure 1.4.F1. - High-LevelOwnership Chart	12
Figure 2.2.1.F1. - Summary of BofASE's Minimum Capital Requirement	16
Figure 4.1.F1. - BofASE Risk Governance Structure	33
Figure 4.7.3.F1. - Actual and Hypothetical Back-testingResults	77
Tables
Table 1.2.1.T1. - EU LI1 Differences between Accounting and Regulatory Scopes of Consolidation and the Mapping of Financial
	8
Statement Categories with Regulatory Risk Categories
Table 1.2.2.T1. - EU LI2 Main Sources of Differences between Regulatory Exposure Amounts and Carrying Values in Financial
	9
Statements
Table 1.2.2.1.T1. - EU PV1 Prudent Valuation Adjustments (PVA)	11
Table 2.1.2.T1. - EU KM1 Key Metrics Template	14
Table 2.2.2.T1. - EU OV1 Overview of Total Risk Exposure Amounts	17
Table 2.3.1.T1. - Capital Surplus over Minimum Capital Requirement and Tier 1 Ratio	19
Table 2.5.1.T1. - Leverage Ratio	20
Table 3.1.T1. - EU AE1 Encumbered and Unencumbered Assets	23
Table 3.1.T2. - EU AE2 Collateral Received and Own Debt Securities Issued	24
Table 3.1.T3. - EU AE3 Sources of Encumbrance	24
Table 4.1.T1. - BofASE Directors Board Membership and Experience (EU OVB)	31
Table 4.2.2.T1. - EU LIQ1 - Quantitative information on LCR	38
Table 4.2.4.T1. - EU LIQ2 Net Stable Funding Ratio	40
Table 4.3.2.T1. - EU CR1 Performing and Non-performing Exposures and Related Provisions	50
Table 4.3.2.T2. - EU CR1-A:Maturity of Exposures	51
Table 4.3.2.T3. - EU CQ3 Credit Quality of Performing and Non-performing Exposures by Past Due Days	52
Table 4.3.2.T4. - EU CQ4: Quality of Non-performingExposures by Geography	53
Table 4.3.2.T5. - EU CQ5: Credit Quality of Loans and Advances to Non-financial Corporations by Industry	54
Table 4.4.2.T1. - EU CR3 CRM Techniques Overview: Disclosure of the Use of Credit Risk Mitigation Techniques	58
Table 4.5.T1. - EU CCR1 - Analysis of CCR Exposure by Approach	61
Table 4.5.T2. - EU CCR2 Transactions Subject to Own Funds Requirements for CVA Risk	62
Table 4.5.T3. - CCR3 Standardised Approach - CCR Exposures by Regulatory Exposure Class and Risk Weights	62
Table 4.5.T4. - EU CCR5 Composition of Collateral for CCR Exposures	63
Table 4.5.T5. - EU CCR6 Credit Derivatives Exposures	64
Table 4.5.T6. - EU CCR8 Exposures to CCPs	64
Table 4.7.2.T1. - EU MR1 Market Risk under the Standardised Approach	69
Table 4.7.3.T1. - Differences between the VaR for Regulatory and Management Reporting Purposes	71
Table 4.7.3.T2. - EU MR2-AMarket Risk under the IMA	75
Table 4.7.3.T3. - EU MR2-B - RWA flow statements of market risk exposures under the IMA	75
Table 4.7.3.T4. - EU MR3 IMA Values for Trading Portfolios	76
Table 4.8.2.T1. - EU OR1 Operational risk own funds requirements and risk-weighted exposure amounts	80
Table 4.9.T1. - EU IRRBB1 - Quantitative information on IRRBB	82
Table 5.2.T1. - EU ILAC Internal Loss Absorbing Capacity: Internal MREL and, where applicable, Requirement for Own Funds and
	93
Eligible Liabilities for Non-EU G-SIIs
Table 5.2.T2. - EU TLAC2a Creditor Ranking: Entity That is Not a Resolution Entity	99
Table 5.5.T1. - EU CCyB1 - Geographical Distribution of Credit Exposures Relevant for the Calculation of the Countercyclical Buffer	96
Table 5.5.T2. - EU CCyB2 Amount of Institution Specific Countercyclical Capital Buffer	99
Table 5.6.T1. - EU CC2 - Reconciliation of Regulatory Own Funds to Balance Sheet in the Audited Financial Statements	100
Table 5.6.1.T1. - EU CCA: Main Features of Regulatory Own Funds Instruments and Eligible Liabilities Instruments	102

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BofA Securities Europe

Pillar 3 Disclosure for the Year Ended 31 December 2023

Table 5.6.2.T1. - EU CC1 - Composition of Regulatory Own Funds	105
Table 5.7.2.T1. - EU LR1 - LRSum: Summary Reconciliation of Accounting Assets and Leverage Ratio Exposures	110
Table 5.7.2.T2. - EU LR2 - LRCom: Leverage Ratio Common Disclosure	110
Table 5.7.2.T3. - EU LR3 - LRSpl: Split-Up of On Balance Sheet Exposures (Excluding Derivatives, SFTs and Exempted Exposures)	113
Table A.1.T1. - EU CR4 Standardised Approach - Credit Risk Exposure and CRM Effects	117
Table A.1.T2. - EU CR5 Standardised Approach	118
Table A.2.T1. - Index	119

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BofA Securities Europe SA

Pillar 3 Disclosure

1. Introduction

As at 31 December 2023

Introduction

5

BofA Securities Europe SA

Pillar 3 Disclosure for the Year Ended 31 December 2023

1.1.Overview and Purpose of Document

This document contains the Pillar 3 disclosures as at 31 December 2023 in respect to the capital adequacy and risk management framework of BofA Securities Europe SA ("BofASE" or the "Company" ).

This document provides details on BofASE's capital resources ("Capital Resources"), regulatory defined Pillar 1 Capital Requirement ("Minimum Capital Requirement") and Total Supervisory Review and Evaluation Process ("SREP") Capital Requirement ("TSCR"). The Pillar 3 disclosures demonstrate that BofASE has Capital Resources in excess of this requirement and maintains robust risk management and controls.

To further increase transparency, this document also includes information on BofASE's liquidity position and information on the capital requirements in respect of the Countercyclical Capital Buffer ("CCyB"). BofASE has not omitted any information on the basis that it is proprietary or confidential, and where information is omitted on the basis that it is not regarded as material, this is noted within this document.

1.1.1. BofASE

BofASE is owned by NB Holdings Corporation (which holds 99.9% of BofASE) and Merrill Lynch Group Holdings I, L.L.C. (which holds 0.1% of BofASE), and its ultimate parent is Bank of America Corporation ("BAC" or "BAC Group"). BofASE's activities form part of BAC's Global Banking and Markets operations in Europe, Middle East, and Africa ("EMEA"), and serves as Bank of America's primary broker-dealer for clients in the European Economic Area ("EEA").

BofASE is a credit and investment institution domiciled in France and headquartered in Paris. BofASE is authorised and supervised by the European Central Bank ("ECB") and the Autorité de Contrôle Prudentiel et de Résolution ("ACPR") and is regulated by the ACPR and the Autorité des Marchés Financiers ("AMF"). BofASE has the ability to trade throughout the EEA. BofASE's Legal Entity Identifier ("LEI") is 549300FH0WJAPEHTIQ77.

As at 31 December 2023, BofASE was rated by Fitch Ratings, Inc ("Fitch") (AA / F1+) and S&P Global Ratings ("S&P") (A+ / A-1).

1.1.2. BofASE's Capital Position at 31 December 2023

BofASE's Capital Resources consist of €7.90 billion Common Equity Tier 1 ("CET1") and €0.92 billion of Tier 2 capital. As at 31 December 2023, BofASE's CET1 ratio was 19.63% which significantly exceeds the Pillar 1 CET1 requirement of 4.5%, and the reported Leverage ratio of 7.68% is in excess of the 3.00% regulatory requirement.

Figure 1.1.2.F1. - Summary of BofASE's Key Metrics as at 31 December 2023

Introduction

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BofA Securities Europe SA

Pillar 3 Disclosure for the Year Ended 31 December 2023

1.2.Basis of Preparation

The Basel Capital Accords provide a series of international standards for bank regulation commonly known as Basel I, Basel II, and, most recently, Basel III. Basel III was implemented in the EU through the Capital Requirements Directive ("CRD") and the Capital Requirements Regulation ("CRR"), as amended by the Capital Requirements Regulation 2 ("CRR 2"), (collectively known as the Capital Requirements Directive IV ("CRD IV") as amended by Capital Requirements Directive V ("CRD V")). The CRD IV requirements took effect from 1 January 2014. The CRR 2 entered into force in June 2019 (with most provisions effective from 28 June 2021), while CRD V was transposed into French law in line with the EU transposition deadline of 29 December 2020. As an amending regulation, the existing provisions of CRR apply unless they are amended by CRR 2.

This legislation consists of three pillars. Pillar 1 is defined as "Minimum Capital Requirement,"Pillar 2 "Supervisory Review Process," and Pillar 3 "Market Discipline." The aim of Pillar 3 is to encourage market discipline by allowing market participants to access key pieces of information regarding the capital adequacy of institutions through a prescribed set of disclosure requirements.

The information contained in this Pillar 3 disclosure has been prepared in accordance with Part Eight of the CRR, as amended by CRR 2, and with additional guidance provided by the ACPR notice "Modalités de calcul et de publication des ratios prudentiels dans le cadre de la CRDIV et exigence de MREL," on an individual basis. These disclosures are updated annually in line with the accounting year end as at 31 December 2023, unless otherwise stated. All tables are as at 31 December 2023, with prior year comparatives as at 31 December 2022. In accordance with Article 433 of the amended CRR, BofASE also produces quarterly disclosures updated on a quarterly basis, with prior period comparatives. All disclosures are made in EUR, unless otherwise stated.

BofASE statutory accounts are prepared in accordance with French Companies Law and Generally Accepted Accounting Principles, with prudential reporting prepared under International Financial Reporting Standards ("IFRS").

Therefore, the information contained in these Pillar 3 disclosures may not be directly comparable with the BofASE Annual Report and BofASE Financial Statements, and the disclosures are not required to be audited by external auditors. In addition, certain components of the disclosure contain forward looking assumptions. Forward-looking assumptions represent beliefs and expectations regarding future events and are not guarantees of future results, and involve certain known and unknown risks and uncertainties that are difficult to predict and are often beyond BofASE's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any forward-looking assumptions. Undue reliance should not be placed on any forward-looking assumptions and consideration should be given to the uncertainties and risks discussed in other publicly available disclosures of BAC.

Although the Pillar 3 disclosure is intended to provide transparent information on a common basis, the information contained in this document may not be directly comparable with the information provided by other banks.

These Pillar 3 disclosures are published on the Investor Relations section of BAC's corporate website: http://investor.bankofamerica.com.

Environmental, Social and Governance

BofASE is not required to make disclosure of Environmental, Social and Governance ("ESG") risks as laid down in CRR Article 449a as it does not meet the criteria of "large institutions which have issued securities that are admitted to trading on a regulated market of any Member State".

Please refer to 4.12.3. Climate and Environmental Risk for details on BofASE's approach to climate risk

1.2.1. Mapping of Financial Statement Categories with Regulatory Risk Categories

Table 1.2.1..T1. shows BofASE's accounting balance sheet and breaks down the carrying values of each line item between the relevant regulatory risk framework(s) to which they are allocated. BofASE is subject to the

Introduction

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BofA Securities Europe SA

Pillar 3 Disclosure for the Year Ended 31 December 2023

requirements of Part Eight of the CRR, as amended by CRR2, on an individual basis, and given that the scope of accounting consolidation and the scope of prudential consolidation are exactly the same, columns (a) and (b) of this template have been merged.

Table 1.2.1.T1. - EU LI1 Differences between Accounting and Regulatory Scopes of Consolidation and the Mapping of Financial Statement Categories with Regulatory Risk Categories (€ millions)

			b		c		d		e		f		g
							Carrying values of items
			Carrying									Not subject to
												own funds
		values under
		Subject to the	Subject to the	Subject to the	Subject to the	requirements
			scope of
				credit risk		CCR	securitisation		market risk	or subject to
			prudential
				framework		framework		framework		framework		deduction
		consolidation
											from own
													funds
	Breakdown by asset classes
	according to the balance sheet in
	the published financial statements
1	Cash at bank and in hand	€	5,298	€	5,298	€	-	€	-	€	-	€	-
	Financial assets at fair value through
	profit or loss
2	Securities		14,010		243		-		-		13,767		-
3	Loans and repurchase agreements		28,198		-		28,198		-		28,198		-
4	Derivative financial instruments		46,613		-		46,613		-		46,613		-
	Financial assets at fair value through
	OCI
5	Debt securities		511		511		-		-		-		-
	Financial assets at amortised cost
6	Loans and repurchase agreements		3,060		23		3,038		-		3,038		-
7	Current and deferred tax assets		42		42		-		-		-		-
8	Other assets		17,413		200		14,985		-		-		2,228
9	Tangible and intangible assets
10	Total assets	€	115,146	€	6,316	€	92,835	€	-	€	91,616	€	2,228
	Breakdown by liability classes
	according to the balance sheet in
	the published financial statements
1	Deposits from central banks	€	-	€	-	€	-	€	-	€	-	€	-
	Financial liabilities at fair value
	through profit or loss
2	Securities		10,117		-		-		-		10,045		72
3	Deposits and repurchase agreements		23,847		-		23,847		-		23,847		-
4	Derivative financial instruments		50,691		-		50,691		-		50,691		-

• Derivatives used for hedging purposes
  Financial liabilities at amortised cost

6	Deposits and repurchase agreements	7,386	-	1,560	-	1,560	5,825
7	Subordinated debt	3,317	-	-	-	-	3,317
8	Other financial liabilities	355	-	153	-	-	202
9	Current and deferred tax liabilities	2	-	-	-	-	2
10	Other liabilities	11,260	-	9,011	-	-	2,250

Introduction

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BofA Securities Europe SA

Pillar 3 Disclosure for the Year Ended 31 December 2023

b

c

d

e

f

g

Carrying values of items

Carrying

Not subject to

own funds

values under

Subject to the

Subject to the

Subject to the

Subject to the

requirements

scope of

credit risk

CCR

securitisation

market risk

or subject to

prudential

framework

framework

framework

framework

deduction

consolidation

from own

funds

11

Provisions for contingencies and

61

-

-

-

-

61

charges

12

TOTAL LIABILITIES

€

107,035

€

-

€

85,262

€

-

€

86,143

€

11,728

The sum of amounts disclosed in columns (c) to (g) may not equal the amounts disclosed in column (b), as some items are subject to capital requirements for more than one risk framework listed in Part Three of CRR.

1.2.2. Differences between the Financial Statements' Carrying Value Amounts and the Exposure Amounts used for Regulatory Purposes (EU LIA)

EU LI2 discloses differences between the financial statements' carrying value amounts and the exposure amounts used for regulatory purposes. The purpose of the following table is to provide information on the main sources of difference between the financial statements' carrying value amounts and the exposure amounts used for regulatory purposes.

Table 1.2.2.T1. - EU LI2 Main Sources of Differences between Regulatory Exposure Amounts and Carrying Values in Financial Statements (€ millions)

		a		b		c		d		e
						Items subject to
		Total
			Credit risk	Securitisation		CCR	Market risk
				framework		framework		framework	framework
1	Assets carrying value amount under the scope of	€112,918	€	6,316	€	-	€	92,835	€	91,616
prudential consolidation (as per template LI1)
2	Liabilities carrying value amount under the scope of	€ 95,307	€	-	€	-	€	85,262	€	86,143
prudential consolidation (as per template LI1)
3	Total net amount under the scope of prudential	€ 17,610	€	6,316	€	-	€	7,573	€	5,473
consolidation
4	Off-balance-sheet amounts	€140,562	€	550	€	4	€	140,007
5	Differences in valuations	€ (188)	€	-	€	-	€	(188)
6	Differences due to different netting rules, other than	135,386		75		-		135,311
those already included in row 2
7	Differences due to consideration of provisions	-		-		-		-
8	Differences due to the use of credit risk mitigation	(268,297)		(451)		-		(267,845)
techniques
9	Differences due to credit conversion factors	(73)		(73)		-		-
10	Differences due to Securitisation with risk transfer	-		-		-		-
11	Other differences	28,328		3		-		28,324
12	Exposure amounts considered for regulatory	€ 53,327	€	6,420	€	4	€	43,181	€	5,473
purposes

Introduction

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BofA Securities Europe SA

Pillar 3 Disclosure for the Year Ended 31 December 2023

Explanations of Differences between Accounting and Regulatory Exposure Amounts

Included below is a summary of the key types of difference between the accounting and regulatory exposure amounts as shown in the reconciliation above.

Off-Balance Sheet Amounts

• Instruments not on the balance sheet, such as guarantees and commitments, are considered as exposures for the calculation of regulatory capital requirements
• Collateral provided in the form of securities (debt and equity instruments) are not shown on the balance sheet, but are used in the calculation of regulatory exposure amounts

Differences Due to Netting Rules

• Under the accounting framework, financial assets and liabilities are offset, and the net amount is reported on the balance sheet where BofASE currently has a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously
• Under the regulatory framework, netting is applied for the calculation of exposures where it is legally effective and enforceable. This typically means that more netting is recognised under the regulatory framework than under the accounting framework

Differences Due to the Use of Credit Risk Mitigation Techniques

• In counterparty credit risk ("CCR"), differences arise between accounting carrying values and regulatory exposure as a result of the application of credit risk mitigation, relating to financial collateral received in derivative and securities financing transactions ("SFTs")

Differences Due to Credit Conversion Factors

• Off-balancesheet exposures are multiplied by a credit conversion factor as defined in the CRR, as amended by CRR 2, in order to determine the regulatory exposure value

Other Differences

• Under the standardised approach for counterparty credit risk an add-on for potential future credit exposure ("PFE") is applied for derivative exposures, and an additional alpha factor of 1.4 is applied in determining the regulatory exposure value

Introduction

10