Risk factor changes · BAC

What changed in Bank of America's risk factors

Item 1A (Risk Factors) of Bank of America's FY2025 10-K compared with its FY2024 10-K, sentence by sentence.

Newer: 10-K filed 2026-02-25 · Older: 10-K filed 2025-02-25

New in the latest 10-K 41

• While the Federal Reserve reduced policy rates in 2025, uncertainty remains regarding the pace and duration of the reduction of market interest rates.
• Significant increases in tariff rates in the past year have generated heightened market volatility.
• Our credit ratings directly affect our borrowing costs and access to funding.
• In addition, while U.S. home prices have experienced meaningful appreciation over the past several years and remained generally stable in 2025, there has been some regional dispersion in Bank of America 12 housing prices since the beginning of 2025, which we have been closely monitoring.
• These trends have negatively impacted housing affordability generally, and therefore the demand for some of our products.
• These LRRs require implementation of complex operational capabilities and compliance programs.
• Also, the use of cyberattacks or campaigns, cyberespionage or other unauthorized access to networks and systems by nation states or their proxies, including utilizing emerging technologies such as AI, has increased and threatens our and our third parties operations and information systems, and the financial systems and infrastructure upon which we rely.
• The uncertainty around the U.S. government s debt levels and ceiling and a growing federal budget deficit could lead to further credit rating downgrades and/or defaults on its debt.
• Regardless of the measures we have taken to implement training, procedures, controls, backup systems and other safeguards to support our operations and bolster our operational resilience, our ability to conduct business may be adversely affected by significant failures or disruptions to us or to third parties with whom we interact and rely upon.
• We use, and expect to increasingly use, emerging technologies, including AI, across our operations, including business processes, services and products, and we expect greater AI adoption by our third parties, clients, counterparties, clearinghouses and financial intermediaries.
• Expanded use of AI, including emerging third party AI services and autonomous AI agents, may result in increased data risk, unpredictable system interactions, inadequate controls or safeguards, AI failure, or produce unintended operations or consequences.
• AI services used by our clients or third parties may interact with our systems or communicate directly with our employees, and may act without authorization, make execution errors, behave unpredictably or be misaligned with intended outcomes, which could result in additional operational, legal and regulatory risk, and reputational harm.
• The tactics, techniques and procedures used in cyberattacks are pervasive, sophisticated, rapidly evolving and designed to evade security measures.
• Emerging technologies, such as AI and quantum computing, are expected to increase these risks.
• For example, AI lowers the entry barriers to plan and execute cyberattacks, enables more personalized and harder to detect social engineering, and improves vulnerability discovery, which may result in the increased likelihood of exploitation and the speed, scope, scale, and sophistication of cyberattacks.
• Advances in quantum computing may introduce cryptography risks that threaten the 15 Bank of America security of our information and systems and strengthen threat actor capabilities in ways that are difficult to anticipate.
• These technologies, alone or in combination with others, may amplify the risks they pose.
• We also face significant third-party technology, cybersecurity and operational risks relating to the large number of clients and third parties on whom we rely to operate our business.
• Threat actors may actively seek to exploit third-party security and cybersecurity weaknesses.
• Also, any similar events affecting our information systems or information could adversely impact third parties and the critical infrastructure of the financial services industry, creating additional risk to us.
• However, we expect to continue to experience such events and impacts ourself and at our third parties with increased frequency and severity due to the evolving threat environment.
• We operate in a highly regulated industry and are subject to evolving and comprehensive federal, state and foreign LRRs and Executive Branch Actions.
• LRRs related to emerging technologies, such as AI, cybersecurity and data management, are also rapidly evolving across jurisdictions and could require changes related to deployments and operational processes and increase compliance costs and regulatory, compliance and legal risks.
• Violations could result in litigation, regulatory fines, enforcement actions and operational loss.
• Expected new and evolving data privacy laws globally may increase compliance costs, litigation, regulatory fines and enforcement actions.
• Costs to settle, remediate or comply with enforcement actions have been substantial and may increase.
• Actions by other financial institutions in businesses in which we operate may result in regulatory investigations adversely affecting us.
• Such claims may require substantial remediation and carry significant penalties, restitution and, in certain cases, treble damages.
• The interconnectedness and complexity of AI models may complicate oversight and compliance, and reliance on third party AI models further increases our risks due to limited visibility into their training data, methodologies and safeguards.
• Inaccurate AI outputs, unintended or unauthorized exposure of confidential information, biases and possible infringement of intellectual property rights through the use of AI increase this risk.
• Also, w e may be adversely impacted by matters related to fraud perpetrated against our clients in connection with their use of electronic payments (including Zelle) and other similar products and services, which could result in judgments or settlements, and adversely affect our businesses and strategies.
• For example, we are responding to demands and requests relating to our past or current policies and practices for providing, maintaining or discontinuing financial products or services to certain clients or potential clients, including account opening, underwriting, credit, transaction monitoring or account closure, which could result in litigation or regulatory action.
• Proposed or future Federal Reserve rulemaking, including to the SCB calculation, CCAR stress tests or otherwise, may impact our SCB requirement.
• Also, U.S. banking regulators are expected to release proposals in 2026 to revise methodologies for measuring and reporting risk-based capital adequacy, including the calculation of RWA and G-SIB surcharge.
• The timing and composition of such proposals are uncertain.
• Final rules issued following those proposals could adversely impact our capital requirements.
• Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.
• Also, our ability to offer certain products and services may be impacted by legal or regulatory considerations.
• Climate-related regulatory approaches and disclosure continue to evolve and diverge across jurisdictions (including the availability of certain reporting exemptions), including among the U.S. and non-U.S., and within the U.S., which could adversely impact our legal, compliance and public disclosure risks and costs.
• Divergent stakeholder perspectives increase the likelihood that any action or inaction we take regarding climate-related matters will be perceived negatively, which could adversely impact our reputation and businesses.

Reworded 207

Removed words are struck through; added words are highlighted.

• Business beginning on page 2, MD&A beginning on page 26 and Notes to Consolidated Financial Statements beginning on page 94. 95.
• General economic, political, social and health conditions conditions, including any prolonged economic downturn that may occur, in the U.S. and abroad affect financial markets and our businesses.
• In particular, global markets may be affected by the level and volatility of interest rates, availability and market conditions of financing, changes in gross domestic product (GDP), economic growth or its sustainability, inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, challenging labor market conditions, wage stagnation, federal government shutdowns, energy prices, home prices, commercial property values, bankruptcies and a default by a significant market participant or class of counterparties, including companies in emerging markets.
• Global markets also may be affected by adverse developments impacting the U.S. or global banking industry, including bank failures, the failure of and nonbank financial institutions institution failures and liquidity concerns, the actual or perceived impact of asset prices exceeding their underlying economic fundamentals, fluctuations or other significant changes in both debt and equity capital markets and currencies, the transition of benchmark rates to alternative reference rates, the impact of the volatility of digital assets on the broader market, changing perceptions of the impact and profitability arising from emerging technologies, the rate of growth of global trade and commerce, trade policies, the availability and cost of capital and credit, disruption of communication, transportation or energy infrastructure, recessionary fears, investor sentiment and the U.S. and global election cycles, including stated, perceived or actual changes to policy and the geopolitical environment.
• Global markets, including energy and other commodity markets, may also be adversely affected by the current or anticipated impact of climate change, acute and/or chronic matters, extreme weather events or natural disasters, the emergence of widespread health emergencies or pandemics, cyberattacks, military conflicts, terrorism, terrorism or other geopolitical events.
• Any sudden or prolonged market downturn, as a result of the above factors or otherwise, could result in a decline in reduce net interest income and noninterest income and adversely affect our results of operations and financial condition, including capital and liquidity levels.
• Elevated inflation and interest rate levels, monetary tightening by central banks, banks and geopolitical developments, including the Russia/Ukraine conflict and the conflicts in the Middle East, have adversely impacted and developments could continue to adversely impact financial markets and macroeconomic conditions, as well as result in additional increased market volatility and disruptions and recessionary risk.
• Global uncertainties regarding fiscal and monetary policies continue to present economic challenges.
• Actions taken by the Federal Reserve or central banks in other jurisdictions, including changes in target rates, balance sheet management and lending facilities, are beyond our control and difficult to predict, particularly regarding inflation, due in response to the uncertainty of inflationary paths.
• Elevated or rising interest rates may If inflation does not continue to result decline toward the Federal Reserve s target, the Federal Reserve may hold the fed funds rate steady or raise rates, resulting in a flat or inverted yield curve, volatility of equity and other markets, and volatility of the U.S. dollar, which could impact investor risk appetite and our borrowers, potentially increasing delinquency rates.
• Financial market volatility could also result from uncertainty about the timing and extent of any additional rate cuts by the Federal Reserve in response to moderating inflation and/or inflation, weakening economic conditions and/or labor market conditions.
• Also, changes to existing U.S. laws and regulatory policies and evolving priorities, including those related to financial regulation, taxation, international trade, fiscal policy, climate change (including efforts to transition to a low-carbon economy) policy and healthcare, may adversely impact U.S. or global economic activity and our clients , our counterparties and our earnings and operations.
• High and rising federal debt levels, investor concerns about the U.S. fiscal trajectory, spending, changes to fiscal policy and uncertainty about the U.S. budget process could lead to lower investor appetite or market depth for future issuance of U.S. debt securities, higher interest rates rates, dollar depreciation and financial market volatility, potentially impacting broader economic activity.
• Further, if the U.S. government s debt ceiling limit is not raised addressed and/or increased timely, the ramifications may result in market volatility, ratings downgrades and limit fiscal policy responses to recessionary conditions.
• This could have a negative and potentially severe impact on the U.S. and world economy and financial and capital markets, including higher interest rates, higher volatility, lower asset values, lower liquidity, downgrades to U.S. debt, and a weakened U.S. dollar. dollar, which could adversely affect our results of operations.
• Significant Further increases in tariff rates, or instability associated with tariffs, either broadly applied or Bank of America 8 targeted at specific goods or trading partners, including Canada, Latin America and the People s Republic of China (China), could adversely impact economic conditions and/or result in higher inflation, which could result in financial market volatility as markets adjust to the incremental cost of doing business and/or new business models to reduce the impacts, as well as adversely Bank of America 8 impact asset prices. prices as experienced in early 2025.
• Also, the continuation or escalation of tensions between the U.S. and China, the People s Republic of China (China), including tariff increases, could lead to further U.S. measures that adversely affect financial markets, disrupt world trade and commerce and lead to trade retaliation, including through the use of counter tariffs, foreign exchange measures or the large-scale sale of U.S.
• These developments could adversely affect our businesses, clients, including demand for our products and services, our market-making activities, our and our clients securities and derivatives portfolios, including the risk of lower re-investment rates in those portfolios, our level of charge-offs and provision for credit losses, the carrying value of our deferred tax assets, our capital levels, our liquidity liquidity, our costs of running our businesses and our results of operations.
• Our liquidity, competitive position, business, results of operations and financial condition are affected by market risks such as changes in interest and currency exchange rates, fluctuations in equity, commodity and futures prices, trading volumes and prices of securitized products, the implied volatility of interest rates and credit spreads spreads, idiosyncratic market events and other economic and business factors.
• Changes to fiscal policy, including expansion of U.S. federal deficit spending and resultant debt issuance, could also affect the market s receptivity to debt issuance and market interest rates.
• If interest rates continue to decrease, our results of operations could be negatively impacted, including future revenue and earnings growth.
• If asset values decline, we may incur losses and negative impacts, including to capital and liquidity positions and requirements.
• In addition, increases in interest rates or changes in spreads may continue to adversely impact the fair value of our debt securities and, accordingly, for debt securities classified as available-for-sale (AFS), adversely affect accumulated other comprehensive income and, thus, our capital levels.
• Liquidity If we are unable to access the capital markets, have prolonged we experience sustained net deposits deposit outflows, or our borrowing costs increase, our liquidity and competitive position will may be negatively affected.
• We fund Liquidity is essential to our assets businesses and is primarily with supported by globally sourced deposits in our bank entities, as well as secured and unsecured liabilities transacted in the capital markets.
• We rely on certain secured funding sources, 9 Bank of America such as repo markets, which are typically short-term and may be credit-sensitive.
• We also engage in asset securitization transactions, including with the government-sponsored 9 Bank of America enterprises (GSEs), to help fund a portion of our consumer lending activities.
• Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or uncertainties uncertainty regarding the impact of potential GSE privatization, should it occur. privatization.
• Also, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on lines of credit lines or deposits, slower client payment rates, restricted access to the assets of prime brokerage clients, the withdrawal of or failure to attract or retain client deposits or invested funds funds, including large-scale deposit migration (e.g., from attrition driven by resulting from clients seeking higher yielding deposits or securities products, desiring to utilize an alternative financial institution perceived to be safer, changing investment preferences or securities products, moving balances into digital assets (e.g., stablecoin) or other alternative non-bank financial platforms, changes to spending behavior due to inflation, a decline in the economy or other drivers resulting in an increased need for cash), increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, which could result in the inability to transfer liquidity internally, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event or failure, the default by a significant market participant or third party (including clearing agents, custodians, central banks or central counterparty clearinghouses (CCPs)) or the inability to sell assets due to illiquid markets (e.g., no market exists or market saturation).
• Several of these factors may arise due to from circumstances beyond our control, such as general market volatility, disruption, shock or stress, stress in sovereign debt markets, the emergence of widespread health emergencies or pandemics pandemics, sanctions and geopolitical events and/or turmoil (including military conflicts, such as the Russia/Ukraine conflict and the conflicts in the Middle East, or any potential escalation of such conflicts).
• Federal Reserve policy decisions (including fluctuations in interest rates or Federal Reserve balance sheet composition), negative views or loss of confidence about us or us, the financial services industry generally or the U.S. monetary system generally, or due to a specific news event (e.g., regional bank failures), the further development and acceptance of nonbank digital asset ecosystems (e.g., stablecoin), changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us.
• The impact of these potentially sudden events, whether within our control or not, could include an result in our inability to sell assets or redeem investments, unforeseen outflows of cash, the need to draw draws on liquidity facilities, the reduction of reduced financing balances and balances, the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests, the need for additional funding for commitments and contingencies and unexpected collateral calls, among other things, the result of which could be increased costs, a liquidity shortfall and/or impact on our liquidity coverage ratio and net stable funding ratio.
• Our liquidity and cost of funds may be impacted by our reputation risk, reputational damage, investor behavior and confidence, debt market disruption, firm specific concerns or prevailing market conditions, including changes in interest and currency exchange rates, significant fluctuations in equity and futures prices, lower trading volumes and prices of securitized products and our credit spreads.
• Increases in interest rates and our credit spreads can increase the cost of our funding costs and result in mark-to-market or credit valuation adjustment exposures.
• Changes in our credit spreads Credit spread changes are market driven and may be influenced by market perceptions of our creditworthiness, including changes in our credit ratings rating changes or changes in broader financial market and macroeconomic conditions.
• We may also experience net interest margin compression from offering higher than expected deposit rates in order to attract and maintain deposits. deposits or otherwise.
• Concentrations within our funding profile, such as maturities, currencies by maturity, currency or counterparties, counterparty, can also reduce our funding efficiency.
• Our Rating agencies conduct ongoing reviews of our credit ratings are subject to ongoing review by rating agencies, which consider based on a number of financial and nonfinancial factors, including our franchise, financial strength, performance and prospects, management, governance, risk management practices, capital adequacy, asset quality and operations, among other criteria, as well as factors not under beyond our control, such as regulatory developments, the macroeconomic and geopolitical environment and conditions, changes to in rating methodologies. methodologies or U.S. sovereign debt ratings.
• Any reduction A downgrade could result in a wider widen our credit spread and spread, negatively affect our access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical.
• If the Downgrades of short-term credit ratings of our parent company, company or bank or broker-dealer subsidiaries were downgraded, we may experience loss of subsidiaries, could reduce or eliminate access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements.

Removed since the previous 10-K 27

• Monetary policy has contributed to and may continue to result in elevated market interest rates and a flat and/or inverted yield curve.
• Any increases in policy rates, as a response to inflation persistently above central bank targets, changes to fiscal or trade policies, or otherwise, could result in higher market interest rates.
• Globally, although many central banks have begun to remove monetary restriction, policy rates in many countries remain at elevated levels.
• While higher interest rates have generally had a positive impact on our net interest income, they have negatively impacted and could continue to negatively impact investment securities, deposits, loan demand and funding costs.
• In addition to higher interest rates, wider credit spreads can negatively impact capital and/or liquidity by reducing the value of debt securities.
• Any restrictions on the activities of businesses, could also negatively affect financial markets.
• Liquidity is essential to our businesses.
• Our borrowing costs and ability to raise funds are directly impacted by our credit ratings.
• Also, our mortgage loan production volume is generally influenced by the rate of growth in residential Bank of America 12 mortgage debt outstanding and the size of the residential mortgage market, both of which have slowed due to higher interest rates and reduced affordability.
• Our business is highly dependent on the security, controls and efficacy of our information systems, and the information systems of our clients, third parties, the financial services industry and financial data aggregators with whom we interact, on whom we rely or who have access to our clients personal or account information.
• The proliferation of third-party financial data aggregators and emerging technologies, including AI (such as machine learning and generative AI) and robotics, increases our cybersecurity risks and exposure, including by making fraud detection and authentication more difficult.
• Cybersecurity threats and the tactics, techniques and procedures used in cyberattacks change, develop and evolve rapidly and continuously, including from growth in third-party services that facilitate or carry out cyberattacks and from emerging technologies, such as AI (including machine learning and generative AI) and quantum computing, which may be used to enhance the tactics, techniques and procedures described above and facilitate new cyber threats.
• Similarly, any cybersecurity threat or incident, information or security breach or technology failure that significantly exposes, degrades, destroys, renders unavailable or compromises our information systems or information could adversely impact third parties and the critical infrastructure of the financial services industry, thereby creating additional risk for us.
• We are highly regulated and subject to evolving and comprehensive regulation under federal and state laws in the U.S. and the laws of the various foreign jurisdictions in which we operate.
• Also, we are and will continue to be subject to new and evolving data privacy laws in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory fines and enforcement actions.
• The amounts paid by us and other financial institutions to settle proceedings or investigations have, in some instances, been substantial and may increase.
• Actions by other members of the financial services industry related to business activities in which we participate may result in investigations by regulators or other government authorities.
• In particular, we are the subject of litigation regarding our processing of electronic payments through the Zelle network, Bank of America 18 our efforts to detect, prevent and address fraud perpetrated against our clients and/or the handling of fraud-related disputes, which could result in fines, judgments and/or settlements, and adversely affect our businesses and strategies due to the treatment of loss allocations between clients and us, all of which could also adversely impact other similar products and services.
• In 2023, U.S. banking regulators issued notices of proposed rulemaking to revise the measurement of RWA and the G-SIB surcharge calculation, both of which may be re-proposed.
• Also, in 2023, U.S. banking regulators issued proposed changes to the long-term debt requirements for TLAC, which may impact eligibility of certain debt instruments, and in 2024, the Federal Reserve separately confirmed it is considering changes to existing, as well as new, liquidity requirements.
• The timing and composition of any such proposals or re-proposals remain uncertain due to various factors, including changes of leadership positions in the U.S. bank regulatory agencies.
• For example, in 2024, our SCB increased by 70 bps to 3.2 percent and our G-SIB surcharge increased 50 bps to 3.0 percent.
• In 2024, the Federal Reserve announced that it intends to propose potential changes to bank stress tests, which could impact our SCB.
• Increases in market interest rates have resulted in increased focus on asset and liability management, including HTM and AFS securities and related unrealized losses.
• Particularly, there is a global regulatory focus on climate change and existing and pending disclosure requirements in various jurisdictions, with jurisdictional divergence, which is expected to impact our legal, compliance and public disclosure risks and costs.
• Due to divergent views of stakeholders, we are at increased risk that any action, or lack thereof, by us concerning our response to climate change will be perceived negatively by some stakeholders, which could adversely impact our reputation and businesses.
• Due to the evolving nature of climate-related risks, which are expected to increase over time, it is difficult to predict, identify, monitor and effectively mitigate climate-related risks and uncertainties.

Source: SEC EDGAR filings, compared sentence by sentence by EdgarStack. Sentence matching is automated and may pair or split passages imperfectly; check the linked filings before relying on any passage. A software tool, not financial advice. Not affiliated with the U.S. Securities and Exchange Commission.