March 6, 2009 / 2:22 PM / 10 years ago

UPDATE 3-Irish regulator says probing Merrill Lynch trades

* Coordinating with UK and U.S. regulators

* Merrill says is helping in the investigation

* BofA investigates if Merrill delayed booking losses: NYT (Updates with Irish financial regulator comments)

By Victoria Howley and Jonathan Saul

LONDON/DUBLIN, March 6 (Reuters) - Ireland’s financial regulator said on Friday it is investigating the mispricing of trades at Merrill Lynch and is conferring with regulatory counterparts in the UK and the United States.

Earlier, Merrill Lynch revealed it had discovered an “irregularity” during a recent investigation of its London trading positions and said it was helping regulators investigate.

The trading issue, which Merrill did not quantify, was the latest black eye for the investment bank, which agreed to be acquired by Bank of America Corp (BAC.N) last Sept. 15, the same morning that Lehman Brothers Holdings Inc LEHMQ.PK went bankrupt.

“This issue relates to mispricing of trades at their London branch,” a spokeswoman for the Irish regulator said, adding that Merrill Lynch International Bank Ltd, a unit of Merrill Lynch, had notified it of “matters relating to this” on Feb. 18.

She said Ireland’s watchdog is involved because it regulates Merrill Lynch International Bank Ltd.

“We and the UK FSA have agreed the scope of investigations,” she said. “We are liaising with the U.S. parent regulators of Bank of America and Merrill.”

The UK Financial Services Authority refused to comment on the matter.

“Senior managers of the business are focused on the issue and believe the risks surrounding possible losses are under control,” Merrill said in a statement in London.

Merrill’s net loss swelled to $15.84 billion in the fourth quarter amid big writedowns and investment losses on collateralized debt obligations and a variety of other risky securities.

Earlier on Friday, The New York Times reported that Bank of America was probing whether Merrill had delayed booking trading losses until hefty bonuses were approved and the buyout deal was sealed.

Charlotte, North Carolina-based Bank of America is particularly concerned about the activities of a currency trader in London whose operations have come under scrutiny by British regulators, The New York Times said.

Chief Executive Kenneth Lewis initially called the Merrill takeover “the strategic opportunity of a lifetime.”

But months later, Bank of America considered backing out of the deal as it became clear that Merrill’s losses were soaring. The bank said U.S. regulators pushed it to complete the merger.

Bank of America’s stock has sunk 75 percent since the deal closed on Jan. 1. The largest U.S. bank by assets now faces many shareholder lawsuits over the acquisition.

In mid-January the bank received a government bailout to help it absorb losses on $118 billion of troubled assets. Since October it has accepted $45 billion of government aid.

New York Attorney General Andrew Cuomo is conducting a probe into $3.6 billion of executive bonuses awarded by Merrill just before the Bank of America deal was sealed. (Additional reporting by Juan Lagorio in New York and Steve Slater in London, Editing by Gerald E. McCormick and John Wallace)

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