Bank of America : ANNUAL REPORT AND FINANCIAL STATEMENTS 2023

Registered number: 229165

BANK OF AMERICA EUROPE DAC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

BANK OF AMERICA EUROPE DAC

DIRECTORS	C.P. Bessant (Non-executive director) (resigned 13 July 2023)
	O.T. Bussmann (Independent non-executive director)
	I.de Dinechin (Independent non-executive director) (appointed 7 March 2023)
	P.M. Donofrio (Non-executive director)
	S.A. James (Independent non-executive director)
	N.M. Jordan (Independent non-executive director)
	J.H. Lee
	R. McHugh (Independent non-executive director)
	B.A. Mensah (Non-executive director)
	J.G. Murphy (Non-executive director) (resigned 31 December 2023)
	F. Vicario
COMPANY SECRETARY	Merrill Lynch Corporate Services Limited
REGISTERED NUMBER	229165
REGISTERED OFFICE	Two Park Place
	Hatch Street
	Dublin 2
INDEPENDENT AUDITORS	Mazars
	Chartered Accountants and Statutory Audit Firm
	Block 3 Harcourt Centre
	Harcourt Road
	Dublin 2
	Ireland

BANK OF AMERICA EUROPE DAC

	CONTENTS
	Page(s)
Directors' report	1 - ##
Independent auditors' report	39 - ##
Income statement	48
Statement of comprehensive income	49
Statement of financial position	50 - 51
Statement of changes in equity	52 - ##
Notes to the financial statements	54 - 147

BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

The directors present their Annual Report and the audited financial statements of Bank of America Europe Designated Activity Company ("BofA Europe", "the Company") for the year ended 31 December 2023.

The Company is a registered bank in the Republic of Ireland which is authorised and regulated by the Central Bank of Ireland ("CBI") and supervised under the Single Supervisory Mechanism ("SSM") by the European Central Bank ("ECB"). The Company is a wholly owned subsidiary of Bank of America, National Association ("BANA") and the ultimate parent of the Company is Bank of America Corporation (NYSE: BAC) ("BAC"). Hereafter, "affiliate" means BAC or any of its subsidiaries. BAC together with its consolidated subsidiaries, form the "BAC Group" (or "Enterprise").

The Company is a designated activity company and is incorporated and domiciled in the Republic of Ireland, with branches operating in the United Kingdom ("UK"), Belgium, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Spain, Sweden and Switzerland, in addition to its Irish Head Office.

DIRECTORS' RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the directors' report and the financial statements in accordance with Irish law and regulations.

Irish company law requires the directors to prepare the financial statements for each financial year. The directors have prepared the financial statements in accordance with the Companies Act 2014 and Financial Reporting Standard 101 "Reduced Disclosure Framework".

Under company law, the directors must not approve the financial statements unless satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company as at the financial end date, the profit or loss for that financial year and otherwise comply with the Companies Act 2014.

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for ensuring that the Company keeps adequate accounting records which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy, enable them to ensure that the financial statements and directors' report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

PRINCIPAL ACTIVITIES

The Company provides a range of financial services and forms part of BAC Group's Global Banking and Global Markets operations in the Europe, Middle East and Africa ("EMEA") region. Clients principally include large multinational groups, financial institutions, governments and government entities. The Company has the ability to conduct business with international clients and to trade throughout the European Economic Area ("EEA") and other key markets within the EMEA region.

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

As well as providing financial services, during the year the Company also provided support services to other companies in the BAC Group in the EMEA region. Services provided include information technology ("IT") and operations support, administration and human resources ("HR") support and real estate services.

As at 31 December 2023, the Company was rated by Fitch (AA/F1+) and Standard & Poor's (A+/A-1).

FUTURE DEVELOPMENTS

In 2024, the Company intends to commence financially settled commodity derivatives trading as a new product offering for clients. BofA Europe will act in an intermediate capacity and so will not be exposed to any commodity market risk.

MARKET ENVIRONMENT

Geopolitical and Macroeconomic

The 2023 market environment was characterised by turmoil in the banking system, as bank failures early in the year caused stress through the banking system that significantly impacted asset prices and volatility. The situation drove investor caution, and 2023 saw record annual inflows into money market funds and government debt.

2023 was also dominated by the direction of interest rates, as central banks hiked policy rates in an effort to tame inflation. The sharp increase in inflation in the Euro Area and UK started to moderate towards the end of the year, but remained above central bank targets. Looking ahead to 2024, market expectations are that inflation will gradually reduce and central banks may therefore, start cutting rates.

From a macroeconomic standpoint, the main global economic blocks gradually began to decouple, both in terms of growth and inflation. There was a divergence in outlook as the US economy remained strong, however both stagnating growth in Europe and weak growth in China proved to be a key concern for investors and corporates.

Geopolitical risk continued to rise in 2023, driven by the continued conflict between Russia and Ukraine, tensions between China and Hong Kong/Taiwan, and ongoing tensions between the US and China. Additionally, instability in the Middle East, instigated by the conflict between Israel and Hamas, continues to develop and has the potential to broaden in scope.

The macroeconomic and geopolitical environment suppressed deal activity in primary markets, where full year global Investment Banking ("IBK") fees ended the year at the lowest level in over a decade. In EMEA markets, Mergers & Acquisitions ("M&A") activity was down, and the year ended with the lowest announced M&A volumes since 2009. However, there were signs of reopening in capital markets - EMEA Equity and Debt capital markets volumes were up versus the prior year, but still remained below historical levels.

Cybersecurity

The Board has engaged in reviewing the comprehensive Global Information Security ("GIS") Programme throughout the year. The Company has adopted this programme and together with the Information Security Enterprise Policy, has established a risk-based security framework designed to protect the confidentiality, integrity and availability of information assets and resources. The programme is designed to provide the necessary requirements to enable the BAC Group to prepare, prevent, detect, respond, and recover from increasing challenges in the threat landscape. The Information Security Policy, and standards are applicable across the Enterprise and third-party suppliers and are supported by a sustained investment programme across human and technical resources.

Cybersecurity risk and exposure remain heightened because of the evolving nature and pervasiveness of cyber threats and the BAC Group's prominent size and scale, high profile brand, geographic footprint and international presence and role in the financial services industry and the broader economy. The financial services industry is particularly at risk because of its role as a provider of critical payment services, the use of, and reliance on, digital banking and other digital services, including mobile banking products, such as mobile payments, and other web-endcloud-based products and applications and the development of additional remote connectivity solutions, which increase cybersecurity risks.

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

A cyberattack, information or security breach of the BAC Group or of a third party could adversely affect the ability to conduct business, manage exposure to risk, result in the disclosure and/or misuse of information and/or fraudulent activity and increase its operational and security systems and critical infrastructure costs.

In 2023, the Company did not experience any material losses or other material consequences relating to cyberattacks or other information or security breaches, whether directed at the Company or third parties.

CORPORATE GOVERNANCE

The Company is subject to the CBI Corporate Governance Requirements for Credit Institutions 2015 and additional obligations on High Impact designated credit institutions. The Company is also subject to the additional corporate governance obligations for credit institutions which are deemed significant for the purposes of the European Capital Requirements Directive IV ("CRD IV") as amended by Capital Requirements Directive V ("CRD V") and European Banking Authority Guidelines on internal governance under Directive 2013/36/EU. The Company's Board ("the Board") formally reviews the corporate governance structure of the Company, including its branches, on an annual basis to ensure that it meets regulatory and legal requirements and industry best practice.

PRINCIPAL RISKS AND UNCERTAINTIES

The Company's risk management objectives and policies, as well as exposures in relation to the seven key risk types (market, credit, compliance, operational, liquidity, reputational and strategic risks) are described in the notes to the financial statements.

For details of the Company's risk management policies, see note 43.

RISK GOVERNANCE

The Board ensures suitable risk management and controls through the Board Risk Committee ("BRC"), Audit Committee, Nominations Committee, Remuneration Committee and Enterprise Management Risk Committee ("MRC").

The BRC assists the Board in fulfilling its oversight responsibilities relating to senior management's responsibilities regarding the identification of, management of, and planning for key risks of the Company.

The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the preparation and integrity of the Company's financial statements, Compliance Statement and related disclosure matters. In addition, the Audit Committee assists with the oversight of the qualifications, independence and performance of, and the Company's relationship with, the External Auditor and reviewing the scope and engagement terms of the External Auditor, and the performance and independence of the Company's Internal Audit function and Compliance function.

The Nominations Committee assists the Board in fulfilling its oversight responsibilities regarding the governance of the Board relating to nominations to the Board, reviewing and reporting to the Board on matters of corporate governance principles applicable to the Company, reviewing and reporting on Board succession planning, and reviewing and reporting to the Board on senior management talent planning and succession and leading the Board and its committees in their assessment of their performance.

The Remuneration Committee assists the Board in fulfilling its oversight responsibilities relating to the development of, and implementation of the Company's remuneration policies and related regulatory requirements.

The MRC reports to the BRC and is responsible for providing management oversight and approval of (or reviewing and recommending to the BRC) market risk, credit risk, (in conjunction with the Credit Risk Committee), operational risk (in conjunction with the Operational Risk Committee), balance sheet, capital and liquidity management (in conjunction with the Asset and Liability Committee ("ALCO")), country risk, stress testing and concentration risk management activities of the Company (including any branches).

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

REVIEW OF FINANCIAL STATEMENTS AND RELATED ESTIMATES AND JUDGEMENTS

The Audit Committee discharges its responsibility for the monitoring and integrity of the financial statements through:

• review of the financial statements for completeness and compliance with relevant accounting standards and other regulatory and legal requirements;
• reporting to the Board on the consistency and appropriateness of critical accounting policies and any changes thereto, taking into account the views of the Independent Auditors;
• review of any correspondence from regulators in relation to financial reporting;
• review of the going concern statement; and
• review and challenge of material financial reporting judgements, estimates and the actions and judgements of management including those in respect of valuation of financial instruments.

For further detail on the critical accounting estimates and judgements, see note 3.

RESULTS AND DIVIDENDS

The Company's profit on ordinary activities after taxation was $1,447 million (2022: $539 million) as set out in the income statement.

The directors do not recommend the payment of a dividend for the year ended 31 December 2023 (2022: $nil).

BUSINESS REVIEW

In comparison with the year ended 31 December 2022, profit on ordinary activities before taxation increased $1,125 million to $1,839 million.

Income

Total operating income increased by $992 million to $3,020 million. This reflects higher net interest income and net trading income made up of:

• net interest income was $518 million higher
• net fees and commission income was $108 million lower
• net trading income was $123 million higher
• financial instruments measured at fair value through profit or loss ("FVPL") was $173 million higher
• other operating income was $286 million higher

Expenses

Total operating expenses decreased $133 million to $1,181 million compared with the year ended 31 December

2022 comprised of:

• expected credit loss provisions were $186 million lower
• other expense were $53 million higher

Divisional performance

Results are derived from the Company's core Global Banking and Global Markets activities and its Support Services activities, which represent reportable segments. For information on the results of these activities, see note 4.

Global Banking and Global Markets contributed $2,771 million (2022: $1,850 million) of total operating income

before expenses and impairment. The Support Services segment contributed $249 million (2022: $178 million) to total operating income before expenses and impairment.

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

Summary income statement
	2023	2022		Change
	$M		$M		$M
Net interest, fee and commission income	1,440	1,030	410
Net trading and fair value income	458	162	296
Other operating income	1,122		836		286
Total operating income	3,020	2,028	992
Administrative expenses	(809)	(717)	(92)
Depreciation and other operating expenses	(452)	(491)	39
Impairment release/(charge) for credit losses	80		(106)		186
Profit before taxation	1,839	714	1,125
Net interest, fee and commission income

This income reflects the performance of the Company's lending, payment, Corporate Treasury and Treasury Services businesses, consisting primarily of corporate and institutional lending and investment banking fees in addition to certain asset backed lending, secured lending and leasing activity.

Net trading and fair value income

This income reflects the profits on the Company's trading asset portfolio as well as certain lending transactions which the Company has measured at FVPL.

Other operating income

This income is primarily generated through the Company's services to other affiliates in the BAC Group. Service fee income is computed under arm's length principles in accordance with BAC Group's Global Transfer Pricing Policy. The Company's service fee income relates to both its Support Services activity and income generated by Global Banking and Global Markets activities.

Administrative expenses

Expenses are driven by compensation, overhead costs and direct trading-related costs.

Depreciation and other operating expenses

Depreciation expenses are incurred by the Company on property, plant and equipment and right of use assets used as part of its ongoing activities. Other operating expenses primarily relate to service fee expenses resulting from the purchase of services from other affiliates in the BAC Group. The charges are computed under arm's length principles reflecting the economic contribution of the affiliate in accordance with BAC Group's Global Transfer Pricing Policy.

Impairment release / (charge) for credit losses

This represents the charge or release arising from the provision for expected credit losses ("ECL") on the Company's lending businesses, including charge-offs.

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

Capital

Total eligible regulatory capital (exclusive of audited profits in both 2022 and 2023) increased from $14,221 million as at 31 December 2022 to $14,844 million as at 31 December 2023, which consisted of $12,844 million Tier 1 capital (2022: $12,221 million) and $2,000 million Tier 2 capital (2022: $2,000 million). The increase reflects the audited profits for the year ended 31 December 2022

The Company's total capital ratio at 31 December 2023 as estimated was 25.0% (2022: 26.2%), significantly exceeding the minimum capital requirement.

Further information on the Company's capital requirements under the CRD V is available in the Company's Pillar 3 disclosure document.

Taxation

The Company's effective tax rate for the year is 21.3% (2022: 24.5%) driven mainly by foreign tax liability arising from overseas branches in London, Frankfurt and Paris. For details of the factors affecting the tax charge for the year, see note 15.

Liquidity

The Company is subject to the Basel III liquidity requirements legislated by the European Commission's Capital Requirement Regulations ("CRR") and CRD IV as amended by CRD V including rules implementing the requirement for credit institutions to comply with the Liquidity Coverage Ratio and Net Stable Funding Ratio.

The Company was in excess of its regulatory liquidity requirements in 2023.

POLITICAL CONTRIBUTIONS

The directors have satisfied themselves that there were no political contributions during the year (2022: $nil) that require disclosure under the Electoral Act 1997.

INDEPENDENT AUDITORS

The Independent Auditors, Mazars, Chartered Accountants and Statutory Audit Firm, have indicated their willingness to continue in office in accordance with section 383(2), of the Companies Act 2014 and a resolution that they be reappointed will be proposed at the Company's Annual General Meeting.

NON-FINANCIAL STATEMENT

Overview of Company and Policies

The Company's business model creates value for its stakeholders by providing a range of financial services to customers across EMEA. These operations expose the Company to a number of risks, including those of an environmental or social nature.

BAC Group's Environmental and Social Risk Policy Framework ("ESRPF") aligns with the Company's Risk Framework and provides additional clarity and transparency regarding the Company's approach to environmental and social risks, inclusive of climate-related financial risk ("climate risk") and each employee's responsibilities for risk management. Like all risks, environmental and social risks require coordinated governance, clearly defined roles and responsibilities, and well-developed processes to ensure they are identified, measured, monitored and managed appropriately and in a timely manner. Recognising that certain sectors are more sensitive to these types of risk, the Company evaluates the associated risks as appropriate.

Further information about BAC Group's approach to sustainability matters can be accessed via the ESRPF at www.bankofamerica.com/ESRPF, Bank of America's Task Force on Climate-related Financial Disclosures Report

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BANK OF AMERICA EUROPE DAC

DIRECTORS' REPORT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2023

(the "TCFD Report") available at www.bankofamerica.com/TCFD, and Bank of America's Annual Report available at investor.bankofamerica.com/annual-reports-and-proxy-statements.

Set out below is a summary of the Company's approach to management of climate and environmental risk.

Environmental Matters

Climate risk is the risk that climate change or actions taken to mitigate climate change expose the Company to economic, operational or reputational harm. Climate-related risks are divided into two major categories, both of which span across the seven key risk types:

• Physical Risk: Risks related to the physical impacts of climate change, driven by extreme weather events such as hurricanes and floods, as well as chronic longer-term shifts such as rising average global temperatures and sea levels, and
• Transition Risk: Risks related to the transition to a low-carbon economy, which may entail extensive policy, legal, technology and market changes.

Physical risks of climate change, such as more frequent and severe extreme weather events, can increase the Company's risks, including credit risk by diminishing counterparties' repayment capacity or collateral values, and operational risk by negatively impacting the Company's facilities, employees, or vendors.

Transition risks of climate change may amplify credit risks through the financial impacts of changes in policy, technology or the market on the Company or its counterparties. Unanticipated market changes can lead to sudden price adjustments and give rise to heightened market risk. Reputational risk can arise for the Company, if BAC does not meet its climate-related commitments and/or goals, or is perceived to be inadequately responsive to climate change.

No material climate-related risk variables impacting the financial position of the Company as at 31 December 2023 have been identified. For financial assets held at amortised cost, there has been no material impact of climate- related risks on the Company's allowances for expected credit losses. For financial instruments held at fair value, there have not been any adjustments to fair value specifically for climate-related risks.

The following sections provide more details on climate strategy, governance, and risk management.

Strategy

The Company, as part of BAC, is aligned to BAC's strategy. The tenets of Responsible Growth serve as the foundation for BAC's performance and progress. BAC adopted Responsible Growth in 2014 and has disclosed BAC's progress on its core tenets in BAC's Annual Report to shareholders ever since. In keeping with these core tenets, it is BAC's responsibility to guide BAC's clients through times of economic stability and times of stress.

In 2021, BAC committed to achieving Net Zero before 2050 in our financing activities, operations and supply chain (Net Zero goal), and in 2022, BAC released BAC's Approach to ZeroTM, a framework for how BAC will achieve its Net Zero goal. In line with this approach, BAC has set and will continue to set interim 2030 targets across BAC's financing activities (2030 Financing Activity Targets), operations and supply chain, all of which are further supported and complemented by BAC's $1.5 trillion by 2030 sustainable finance goal.

Further details on the strategy including BAC's commitment to achieving Net Zero before 2050 can be found in BAC's TCFD Report. The report also provides details on BAC's opportunities to mobilise and deploy capital through its 2030 $1.5 trillion sustainable finance goal (including $1 trillion to accelerate the transition towards a low-carbon economy), how global teams manage opportunities, and its delivery towards that goal through its Lines of Business ("LOBs"). The climate strategy and opportunities are managed at an Enterprise level and individual legal entities within the BAC Group contribute to this goal. The Company's approach to managing climate-related risks is detailed within the "Risk Management" section below.

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