Bank of America receive $20bn cash injection

| January 16, 2009 | 0 Comments
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Emergency funding of $20 billion (£13.4 billion) has been provided to Bank of America after it shares plummeted 17.5% yesterday amid speculation that the bank might be nationalised.

In return for the cash injection, the bank must adhere to strict restrictions on senior management pay.

Bank of America has been one of the strongest in the US, until it completed a takeover of Merrill Lynch just days after the collapse of Lehman Brothers last September.

The funding provided by the US Government will enable the bank to absorb the losses it incurred following the takeover of Merrill Lynch.

In return for the funding, the US Treasury will acquire a stake in the troubled bank.

In addition to the $20 billion cash injection, an asset pool of approximately $118 billion of loans will be provided to safeguard against the possibility of unusually large losses.

Furthermore, the aim is to foster financial market stability and thereby to strengthen the economy and safeguard jobs, added the Treasury.

There are also fears over US banking giant Citigroup after its shares plummeted 21% in early trading yesterday.

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