Bank of America (in 2010) and the new financial landscape Harvard Case Solution & Analysis

Bank of America (in 2010) and the new financial landscape Case Solution


This case defines the role of one of the largest banks in the world named Bank of America, whose function was to provide the financial assistance, services and facilities to the corporations and other major sectors of the businesses. Under this case, it has been analyzed that the Banking industry was suffering from the crisis, which was experiencing an economic downturn during the financial crisis of 2008-2009. The Bank of America was one of them, which was struggling to recover from the severe impact that might cause the bank to shift into the Bankruptcy case.

Historically the banks were considered as the key players to increase the economic impact over the country. They provide financial support in terms of monetary or equivalent value to the major sectors as well as the new entrants in order to improve the financial stability of the country. In contrast, they also forced the corporations and other major sectors of the country to bankruptcy due to their inability to pay the debt because of the poor economic conditions.

On the other hand, the Bank of America was also subjected to near bankruptcy when there was a strong concern about the blast of economic bubble through high property rates that were subjected to decline due to the high involvement of speculators and the shadow banks. Under this case, a serious threat of sub-prime mortgage crisis was on the way before the global financial crisis. Thus, it negatively affected the economic condition of the country by not allowing the middle class to repay the debt under high interest rate, which also ledto the reduction of refinancing activities that they would tend to prefer.

During the financial crisis, there was also a serious threat of damaging the TARP funds due to the fall of the mortgage properties, as well as it would negatively affect the securitization of the financial institutions, which were based on the Asset Backed Securities. The entire chain showed that it would damage all the participants involved under sub-prime mortgage. However, after the end of the crisis, many businesses suffered a huge loss due to their inability to repay the debt under huge interest amount. This also damaged the banking sectors as they were unable to repay the TARP funds to the institutions and Federal Reserve under government regulations.

The Bank of America was also subjected to a loss because when it acquired Merrill Lynch, it was followed a serious threat by the government regulators because they were involved to give bonus payments to their shareholders prior to the agreement. As a result, this led toa lack of transparency level in the disclosure of the financial data of Bank of America. Later on, the Federal Reserve sued a law suit against them regarding the violation of amount and un-necessary transactions.

Therefore,in order to control all the major issues, which almost led to bankruptcy and major losses,the bank was involved in a serious transformation of the management and the corporate governance in which they refreshed the top management and assigned Brain Moynihan as the new CEOto run the business. In the given period, the bank controlled some of the issues by repaying the TARP to the institutions to control the future losses as occurred in the past. However,the situation showed that it was not in a good position as compared to its competitors because of the huge funds undertaken by them. Therefore, it shows that the case can affect the entire process of control of Bank of America in order to survive for their future and to stand in a competitive position as in the past.

Problem Statement

Under the following case, it is analyzed that Bank of America was facing some severe issues that would bring a change in policies, strategies as well as minimize the loan risk exposure..................

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