Bank of America reportedly is operating under a secret and strict U.S. regulatory sanction, one that mandates an overhaul of the BofA board and addressing perceived risk-management and liquidity issues. The Wall Street Journal first reported the story on July 16, 2009.
According to the WSJ, the sanction comes in the form of a “memorandum of understanding,” or MOU, which is a formal regulatory statement that gives financial institutions a chance to work out their problems without public scrutiny. For companies that fail to resolve the issues in question, harsher penalties may be invoked, including a cease-and-desist order.
It was two months ago, following results of the government’s stress tests on major U.S. financial institutions, that federal regulators initially informed Bank of America it needed to take immediate steps to address its $34 billion capital shortfall. At the same time, federal officials urged the bank to revamp its board and bring in more individuals with extensive banking experience.
Bank of America now faces a series of deadlines to meet various requests by regulators. Some of those deadlines take place later this month, according to the Wall Street Journal.