Balanced News Blog

Merrill Lynch discovered a trading “irregularity” during a recent investigation of the troubled investment bank’s London trading positions, the company said today.

The trading issue, which Merrill did not quantify, was the latest black eye for the bank, which agreed to be acquired by Bank of America on 15 September, the same morning that Lehman Brothers Holdings went bankrupt,

Merrill’s net loss swelled to $15.84bn (£11.15bn) in the fourth quarter amid big writedowns and investment losses on collateralised debt obligations and a variety of other risky securities.

Merrill said in a statement that it had informed regulators about the “irregularity” and was working with them to investigate.

“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.

The Financial Services Authority refused to comment on the matter.

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

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 newspaper said.

A Bank of America spokesman could not immediately be reached for comment.

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 US regulators pushed it to complete the merger.

Source: The Independent