Bank of America is 2nd major U.S. financial institution to face derivatives proxy vote by shareholders

Verdict at BofA‘s Wednesday Annual Meeting comes on heels of huge 30 percent support at Citigroup on same Resolution; Most telling of 4 votes on Resolution? More disclosure considered vital given how mishandling of CDOs tripped up BofA’s Merrill Lynch.

With a much higher-than-expected 30 percent of Citigroup shares voted on April 20th in favor of more disclosure of derivatives practices, the focus now shifts to Bank of America (BofA), where shareholders will vote Wednesday (April 28th) on the same resolution sponsored by faith-based institutional investors belonging to the 300-member Interfaith Center on Corporate Responsibility (ICCR). The BofA vote will take place as Congress debates the fate of financial regulatory reform, including increased derivatives disclosure.

The resolution gives shareholders an opportunity, as they did at Citigroup, to express their concerns about the lack of transparency in the derivatives market that contributed significantly to the financial crisis. The higher-than-expected vote from Citigroup shareholders resulted even though the United States government, which controls 27 percent of Citigroup as a result of the bank bailouts, failed to fully support the resolution.

With the Citigroup vote concluded and the Bank of America shareholder balloting taking place Wednesday, subsequent shareholder votes on the derivatives disclosure resolution are set for Goldman Sachs (May 7), and JP Morgan Chase (May 18). Taken together, the resolution targets are four of the five U.S. financial institutions accounting for a reported 96 percent of all derivatives trading in the U.S. The resolutions mark the first time that the banks will face a vote by shareholders on a call to explain their policy on how collateral is secured for the derivatives they use and what their policy is about using their customers’ funds for other speculative activities. (JP Morgan Chase faced a derivatives-related measure with a different focus in 2004.)

Looking forward to the Wednesday annual meeting proxy vote at Bank of America, resolution filer and ICCR Board Member Rev. Seamus Finn, director, Justice, Peace & Integrity of Creation, Missionary Oblates of Mary Immaculate said: “We believe that we have considerable momentum working in our favor now that 30 percent of Citigroup shares were cast in favor of the resolution now pending at Bank of America. These votes send a strong message to 
that the ‘old ways’ on derivatives and all of the attendant market-crashing risk they involve is no longer acceptable. In fact, the Bank of America annual meeting may be the most telling among the four votes on this resolution, given the role that irresponsible handling of collateralized debt obligations (CDOs) played in bringing down Merrill Lynch to the point that it was sold at fire-sale prices to Bank of America.”