Bank of America bail-out agreed

LONDON. January 16. KAZINFORM Bank of America will receive $20bn (Ә13.4bn; 15.1bn euros) in fresh US government aid and $118bn worth of guarantees against bad assets.

The emergency funding will help the troubled bank - the US's largest - absorb the losses it incurred when it bought Merrill Lynch. In return for the money, the US Treasury will take a stake in the bank. Bank of America had been seen as one of the strongest US banks, at least until its decision to take over Merrill. Shares in Bank of America fell 17.5% on Thursday as investor confidence in the banking sector took a hit. "The objective of this programme is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings and retirement security," the US Treasury said. In addition to the $20bn cash injection, the Treasury will "provide protection against the possibility of unusually large losses on an asset pool of approximately $118bn of loans". Restrictions In return for the aid, the bank must meet strict restrictions on executive pay. Bank of America has already received $25bn in capital injections from the Troubled Assets Relief Programme, known as Tarp, the bail-out fund designed to rescue banks reeling from the financial crisis. Bank of America underestimated the levels of debt it was taking on as a result of the deal. "It's a big question for Bank of America's management. They just went into an acquisition and now need aid. It looks like another bad deal with poor due diligence," said Peter Hahn at The Cass Business School.