Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA)

Enterprise Risk Management (ERM)ABN AMRO Business Unit North America (BU NA)

Presentation to the Federal Reserve Bank of Chicago

August 14, 2007

2

Table of Contents

Program Update2

Introduction1

Appendix A: Emerging Risk Task Force3

Appendix B: ERM Dashboards (Weekly and Monthly)4

3

Business in Transition

The proposed sale of the LaSalle Bank Corporation (“LBC”, in conjunction with a proposed merger or sale of the remaining ABN AMRO group, announced in April 2007) has changed our risk state from “business as usual” to “business in transition.”

The change in risk state led to a heightened level of uncertainty.

However, the future of LBC became more clear on July 13, 2007, when the Dutch Supreme Court ruled that the sale of LBC to Bank of America can proceed without shareholder approval. This ruling overturned the previous Enterprise Chamber Court ruling in May 2007.

July 13, 2007

July 13, 2007

Supreme Court Decision

Supreme Court Decision

December 31, 2007

BoA transaction expected to close

March 31, 2008

Barclays transaction expected to close

March 31, 2008

Consortium transaction expected to close

September, 2007

Shareholder vote (Barclays vs. Consortium)

September, 2007

Shareholder vote (Barclays vs. Consortium)

BoA TRANSITION PERIOD

BARCLAYS TRANSITION PERIOD

BoA INTEGRATION PERIOD

BARCLAYS INTEGRATION PERIOD

2009 / 2010

RBS / CONSORTIUM TRANSITION PERIOD RBS / CONS. INTEGRATION PERIOD

2009 / 2010

Royal Bank of Scotland (“RBS”) / Consortium

Barclays / Bank of America (“BoA”)IL

LUSTR

ATIVE

4

Business in Transition

Uncertainty still remains for the Business Unit North America ex-LBC (BUNA ex-LBC). The future for BU NA ex-LBC is expected to become more clear after the shareholder vote planned for September 20, 2007.

As a result of the uncertainty across all of BU NA, an Emerging Risk Task Force was formed in May to identify new risks or heightened risks (“emerging risks”).

The Task Force played a role during the pre-transition period by assembling a cross-functional team to re-evaluate enterprise-wide risks.

For our ERM Program, this “business in transition” state has resulted in a change in prioritization of projects as well as change in focus to “emerging risks.”

5

Table of Contents

Program Update2

Introduction1



6

“To timely identify, manage and report all material risks in an integrated manner

to enable optimal informed and efficient decision making, resulting in increased

enterprise value.”

ABN AMRO ERM VISION

Program Objective:

“Getting the right information, to the right people, at the right time, to make the right decisions.”

This will be accomplished by:

Understanding the decisions we must inform

Providing the information necessary to inform each decision via integrated, concise, and relevant communication of risk information

Defining and establishing the components and interactions necessary to ensure that this information is collected, aggregated, analyzed, and delivered in a timely and quality manner to decision makers.

ERM Vision and Program Objective

UPDATED

7

Q3 2007

• January - Communication from Norm Bobins regarding adherence to Bank policies and Standards of Conduct, and prompt escalation of security, compliance and risk issues• February – ERM Program Plan, Organizational Structure (new ERM Committee), Risk Outlook Process and second ERM Dashboard approved and endorsed by NA RMC.• March – ERM Committee Charter approved in principle; Standards of Conduct updated to include Risk Issue Escalation and Risk Incident Reporting sections.

• April – inaugural ERM Committee meeting. Preliminary findings and recommendations from Risk Independence Review presented to RMC.• May – Emerging Risk Task Force formed. List of emerging risks developed and “top questions” presented to RMC.• June – Emerging Risk questionnaire developed and interviews of senior management completed. “Creating a No Surprises Culture” communication from Robert Moore and Terry Bulger sent to all North American bank employees.

Q4 2007Q1 2007 Q2 2007

PLANNED

Communications:“Everyone is a Risk Manager”

Management Information:Enterprise-wide

Stress Test

Risk Oversight and Independence:Emerging Risk Task Force

Support for Transition TeamModel Governance Review

Management Information:ERM Dashboard (weekly and monthly updates)

Strategic and Alignment:Risk Appetite

ERM Projects - 2007

8

Table of Contents

Program Update2

Introduction1



9

In May 2007, at the request of the RMC and the ERM Committee, the Emerging Risk Task Force was formed to respond to the changing risk state from “business as usual” to “business in transition.”

Emerging Risks are defined as those risks which are new to the organization or are heightened due to our changed risk state.

The Emerging Risk Task Force is led by Group Audit with representation from Finance, Compliance, Legal, HR, Group Security, ERM PMO, Operational Risk Management and Technology Risk Management.

The objective for the Emerging Risk Task Force is to help management identify and report to the RMC on the new and increasing risks to our organization.

At this time, no previously unidentified risks were noted. However, as the transaction unfolds, the task force expects the potential for risk to increase.

This high-level risk identification process is a continuation of the “Top Risk” process started earlier this year by the ERM PMO.

This process will continue to evolve as more clarity is provided around the expected transaction.

Overview

10

Common Emerging Risk Themes

Personnel

Most commonly cited concern was accelerated loss of key personnel and the inability to replace them. Implications noted were inability to meet service and financial performance goals.

Operations

Common theme is that quality of controls will decline due to loss of qualified staff and/or existing staff distracted by merger news. Capacity and flexibility to handle change, recover from problems, and maintain security will be diminished.

Customers

Concerns were loss of customers and difficulty in attracting new clients (or expanding existing relationships) due to going concern issues. Customer losses increasing due to departure of relationship managers and poaching by competitors.

11

D R A F T FOR DISCUSSION PURPOSES

Emerging Risks SweitserReport owner: McNally

At the request of the RMC, a task force was created to identify emerging risks related to the current merger activities. Personnel were assigned representing all BU NA business units. Task force members interviewed RMC members and their direct reports to identify emerging risks. These tables summarize the significant task force findings.

Recommendation: RMC members review the emerging risks identified, consider if applicable to their respective business units, and report on mitigating actions that need to be taken.

Issue Theme Interview observations Actual / potential mitigating actions Cited By 1 Dashboard 2

Personnel Issues Loss of experienced employees (attrition, turnover, poaching) and inability to hire qualified replacements (perms or temps). Existing retention and CIP bonus plans insufficient to retain key personnel.

Retention program; market increases; CIP bonuses; discretionary bonuses; enhance / expand bonus plans; identify key staff; guarantees to top staff; active communications with staff; regular meetings with staff; reorganize remaining personnel

Compliance; Risk; Legal; Services; GSTS; TB; Audit; Com’l; GM; GC;

Finance; PFS; AM; BAN

Strategic Human Capital

Services Legal

Controls weakened due to employee lack of interest, lost focus, diluted coverage, distractions, or fatigue. Service levels degraded due to SBR results / distractions of employees

Re-prioritize tasks; reallocate resources; maintain communications between management and staff; continuously monitor processes; monitor staff performance; adjust assignments; identify temp services

GSTS; Legal; Finance; Services:

Audit; HR

Legal Services (?)

Audit (?)

Files or systems sabotaged by disgruntled employees Monitor to detect problems; make quick corrective actions; restrict physical access; restrict systems access

Services Services

Conflicting short-term and long-term goals due to BPE; BPE revenue targets above industry growth rates; With changing staff motivations (short-term with BPE) will staff still escalate issues

Align goals; reinforce standards of conduct (SoC); reinforce escalation processes

Compliance; PFS; Audit

Strategic Finance

Complications from dual reporting lines; conflicting interests; poor or no coordination

Escalate to global management for resolution TB TBD

1: BU’s shaded color indicates the interviewees’ assertions of the overall risk to BUNA. Red=High; Yellow=Medium; Green=Low; Gray=Undefined 2: Reference to related analytics in ERM Dashboard. Blue text indicates either potential future additions or areas requiring more research.

12



Operational Issues Proprietary information lost; customer information lost / stolen / taken

Raise awareness; confirm SoC; send Ethics letters to departed employees; consider sending letters to competitors; evaluate obligations per PSA

Privacy; GSTS; PFS

Services Reputation

Processing functions weakened due to loss of resources; unable to service clients (internal and/or external); unable to meet regulatory obligations; loss of history / information; less global cooperation

Document procedures; identify key positions; cross-train staff; create succession plans; identify back-ups; draft retention plans; update files; complete records

HR; Privacy; GC; PFS; BAN

Services Operational Compliance

Audit Increased incidence of security breaches due to employee carelessness or lack of motivation; increase in cyber-crime due to higher profile, fewer resources available to detect and defend

Raise awareness of employees on threats / actions; escalate issues to senior management; monitor actively

Compliance; TB Reputation Services (?)

Unable to maintain systems due to loss of staff Reduce number of projects, monitor actively; determine and maintain minimum staffing requirements

PFS; Fin; TB; Services

Services

Ownership of applications, software, licenses, memberships; separating support processes, employees, clients, financials, etc.

Determine application users / owners and impact; assign all processes, employees, clients, financials, etc.

TB; Finance; GC; Risk; AM; PFS

Transition Team (?)

Customer Issues Increasing upgrades and covenant lite loans; accepting unsuitable clients or developing unsuitable products to meet short-term goals

Perform additional reviews; analyze data; monitor client acceptance processes; oversight by Product Committee

Risk; PFS Credit Operational

Loss of current and potential clients due to: loss of confidence, lured away by competitors, fewer referrals, shrinking pipeline

Make senior management available to meet and assure customers; provide materials to address reputational risks; active reassurance of customers; market products not brand; maximize existing client relationships

GM; GC; PFS; Com’l; BAN

Risk Appetite Com’l Banking

Indicators Eagle Pipeline DDA Activity

Loss of customers as they follow departing Relationship Managers, Portfolio Managers, etc.

Retain talent through stabilization plan. Promote: professional development, succession plan, cross-training, monitoring, communications from mgmt to staff; letters to departed employees on fiduciary responsibilities & possible legal actions

PFS; AM; Com’l TBD

Other Issues Department of Justice negotiation motivations Close monitoring of negotiations Legal Strategic

Reputation

13

Table of Contents

Program Update2

Introduction1



14

ERM – Flow of Management InformationL

evel

of

De

tail

Monthly ERM Dashboard

Weekly ERM Dashboard

Emerging Risk Issues

“Top 5”Risk Issues

Line of Business and Functional Reporting Packages

15

ERM Dashboard

The ERM Dashboard was created to represent a holistic view of all risks across the

enterprise and to increase transparency of risk for BU NA.

As seen on the previous slide, there were numerous line of business and functional

reporting packages. However, prior to the creation of the ERM Dashboard, BU NA did

not have a consolidated risk reporting package. This issue was also highlighted by the

Federal Reserve earlier this year. The ERM Dashboard fills this gap and meets with

regulatory requirements.

In constructing the ERM Dashboard, BU NA’s Enterprise Risk Reporting team utilized a

“hub and spoke” structure to leverage existing risk reports while centralizing enterprise-

wide risk issues into a consistent reporting template.

This risk reporting framework is expected to support the governing committees as it

balances decision making between business and risk.

BU NA’s Dashboard was also used as a template for creation of a Group Dashboard.

16

ERM Dashboard The ERM Dashboard has been in production since February 2007. The dashboard

was originally produced as a monthly report. However, due to more frequent risk

information requests (regulatory), our Enterprise Risk Reporting team has started to

produce a few key metrics on a weekly basis (e.g. Human Capital, Loan Pipeline and

Liquidity).

The content of the report is fact-based, identifying risks assessed by functions across

BU NA, such as:

Credit Risk, Operational Risk, Market Risk, Interest Rate Risk, Liquidity Risk,

Business Risk, Reputational Risk, Strategic Risk, Capital Management Group,

Compliance, Human Resources, Information Technology, Legal, Sarbanes-Oxley,

and Internal Audit.

On the top right of each page, an RMC member is listed to denote responsibility for

delivering fact-based risk data and to establish accountability, highlighting “de facto”

risk owners.

17


Risk Management North America

Weekly Enterprise Risk Management DashboardAugust 8, 2007

information is otherwise made publicly available by ABN AMRO

ABN AMRO ConfidentialThe information given in this presentation and given to you orally during the presentation is confidential and proprietary

information and may not be disclosed by you to any third parties without our prior written approval unless such

18


Dashboard Summary

• Commercial loans are down (1.1%) and DDA balances are down (15.4%) the last 45 days.

• Com’l balances down in all portfolios except Financial Institutions and NA Sectors in the last 45 days.

• Commercial loans are down (1.1%) and DDA balances are down (15.4%) the last 45 days.


Commercial Banking Indicators

Commercial Banking Indicators

PipelinePipeline

Human CapitalHuman Capital

• Voluntary resignations still comparable to one year ago at Jul-07 YTD (191 Jul-07 YTD vs. 194 Jul-06 YTD).

• 27 retention group employees (up 4 from last week) and 20 SVP+ (up 1 from last week) have resigned since June 15th.

• Voluntary resignations still comparable to one year ago at Jul-07 YTD (191 Jul-07 YTD vs. 194 Jul-06 YTD).

• 27 retention group employees (up 4 from last week) and 20 SVP+ (up 1 from last week) have resigned since June 15th.

Liquidity RiskLiquidity Risk• Policy level for LBC’s Liquid Assets/Volatile funding ratio was decreased LBC now within

limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30.

• Policy level for LBC’s Liquid Assets/Volatile funding ratio was decreased LBC now within limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30.

• New approvals totaled $325mln the week ending 8/4; the two lowest annual “new” weekly approval volumes have occurred in the last 45 days.


DDA VolumeDDA Volume• Volume of DDA accounts closed continues to exceed new accounts opened.• Services grouping looking to exclude escrow accounts which might be diluting the Com’l

activity.

• Volume of DDA accounts closed continues to exceed new accounts opened.• Services grouping looking to exclude escrow accounts which might be diluting the Com’l

activity.

• Rates rise Monday, as stocks rally and investors lower demand for government debt.• Rates rise Monday, as stocks rally and investors lower demand for government debt.Market Developments

Market Developments

19


Market DevelopmentsRates rise Monday, as stocks rally and investors lower demand for government debt

WeimerReport owner:Caldwell

Following a week of market fluctuation, treasury prices tumbled the most since July on Monday, as the strongest U.S. stock rally in four years reduced investor demand for lower-risk government debt. The benchmark 10-year U.S. treasury note ended the week at 4.686%, climbing back to 4.739% by the end of the trading day Monday. Yields rose further on speculation that regulatory restraints for Fannie Mae and Freddie Mac may ease. Treasuries had advanced for four straight weeks on concern that a continued fallout in the housing market may result in widespread weakness throughout the economy. Last week’s labor indicators strengthened treasury gains, as Nonfarm Payrolls increased 92,000 in the month of July, down from 126,000 in the month of June. Meanwhile, the Unemployment rate increased to 4.6% from 4.5% in the previous month.

10-Yr Swap v. 2-Yr Swap

Sell / CLN7 COMB Comdty (R) 69.10

Buy / SPU7 Index (L) 1560.10

Unsecured Credit Spreads Secured Credit Spreads

Volatility

Swap Rates

Oil & S&P Futures Commentary

20


Commercial Banking IndicatorsCommercial loans are down (1.1%) and DDA balances are down (15.4%) the last 45 days

• Commercial loan volume (excluding MFG & CMBS) is up $3.1bln compared to one year ago. Primary growth realized in NA Sectors ($1.1bln), CRE ($677mln) and RECM ($511mln).

• Commercial deposits are down $609mln from a year ago due; deposits down in all business lines with exception of NA Sectors (up $19mln) and RECM (up $2mln).


Source: Finance Mgmt. Reporting

HolmesReport owner: Connolly

Commercial Banking Loans 12-Month Trend

46,57646,308

44,879

44,720

42,50043,00043,50044,00044,50045,00045,50046,00046,50047,000

$ M

illio

ns

Commercial Banking Quartly Loan Bal. Linear (Commercial Banking)

Commercial Banking DDA 12-Month Trend

4,0564,114

4,5744,287

3,9654,034

4,4454,103

3,500

3,700

3,900

4,100

4,300

4,500

4,700

4,900

$ M

illio

ns

Commercial Banking Quartrly DDA Bal. Comm'l Adjusted* Qrtly Adjusted* Linear (Commercial Banking)

21


Eagle PipelineNew LCP activity has been below 12 month average over the last 45 days, loans outstanding are down 4.1% Jul-YTD

• New approval volume has averaged $819mln the last 12 months but averaged $584mln per week the last 45 days.


• Loans outstanding are down 4.1% to $99.97bln Jul-YTD; loans declined in July due to CMBS securitization.

• Approximately 44.7% of “new” exposure approved in March & April have funded.

BulgerReport owner: Daw

Last 45 Days: $584mln “new” approved on avg.

New & Renewal Volume Trend*

Commercial Unfunded Approvals Aging

*Committee & Signature Authority Approvals

New 12 month avg. = $819mln

*Committee & Signature Authority Approvals

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

08/19/06 12/30/06 03/31/07 08/04/07

Ap

pro

ved

Lim

it (

$mln

s)

New Approvals Avg New New & Renewals

March April May June July8/6/2007 44.5% 45.0% 34.6% 21.6% 8.5%

7/30/2007 44.5% 45.6% 34.3% 21.9%7/25/2007 41.9% 38.5% 34.3% 14.8%7/16/2007 40.3% 30.6% 31.8% 12.1%7/9/2007 40.2% 31.0% 32.3% 12.3%7/2/2007 41.0% 34.7% 32.2% 11.9%

Commerical "New" Approvals - Funding Levels

($4)

($2)

$0

$2

$4

$6

$8

Feb-06 May Aug Nov Feb May

Ch

ang

e ($

bln

s)

$0

$25

$50

$75

$100

$125

To

tal

Lo

ans

($b

lns)

Commercial Global Markets/Clients PFS Other Total

*Graph excludes 1Q07 NAT RES sale

$99.97bln, down 4.1% Jul-YTD

BU NA Loans Outstanding*

22


DDA Open & Closed Account ActivityReport includes all DDA accounts opened and closed in 2007

RosenthalReport owner: Flom/Gialamas

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

Jan Feb Mar Apr May Jun Jul

# o

f A

cco

un

ts

Closed New Net

Total - DDA New/Closed

• Net change in Retail can be attributable to several factors including:

Account openings tend to peak in the summer months – especially when a promotion is being offered

During the early months of ’07 several of our competitors may have had promotional offerings – we did not

In a rising rate environment, people tend to move money toward savings and CDs

• Services group looking to exclude escrow accounts which might be diluting the Commercial activity.

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000


# o

f A

cco

un

ts

Closed New Net

Commercial - DDA New/Closed

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000


# o

f A

cco

un

ts

Closed New Net

Retail - DDA New/Closed

23


Human Capital

-

100

200

300

400

500

600

Jan-06 Mar May Jul Sep Nov Jan-07 Mar May July

Tu

rno

ver

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

To

tal B

UN

A H

ead

cou

nt

Voluntary Involuntary Staff Reduction Total Headcount

BU NA Turnover

Total BU NA headcount of 13,465 down from 18,444 at YE06

BU NA Turnover by Group (Aug-YTD) • Due to the current state, we can expect to see voluntary resignations increase within the next month.

• Some small but critical increases in voluntary resignations, e.g. retention group departures in Compliance, Finance and PFS (Wealth Mgmt), as well as resignations in revenue generating roles in Commercial, Global Markets and GSTS.

• Attrition is a lagging indicator - from the time an employee acts to leave (beings interviewing) through his/her departure from payroll can be from weeks to months.

*Total Headcount as of 1/30/07

VanDerWerffReport owner: Kaiser

Voluntary Turnover

-

50

100

150

200

250

300

350

Jan-06 Mar May Jul Sep Nov Jan-07 Mar May July

Hea

dco

un

t

-

50

100

150

200

250

300

350

Ave

rag

e

Nonexempt Exempt Officers Average

Voluntary InvoluntaryStaff

Reduction Total% of

Total*New Hires

Open Req.

Asset Mgmt. 6 8 8 22 24.4% 5 8 Audit 7 - - 7 7.2% 6 4 Com'l Banking 188 15 212 415 19.4% 78 2 Compliance 28 5 33 15.2% 15 - Global Clients 3 - 2 5 10.4% 4 - Global Markets 44 2 40 86 18.4% 22 2 GSTS 74 30 38 142 18.9% 279 159 HR 18 18 31 67 18.8% 10 - Legal 8 - 11 19 14.1% 8 - Office of the CEO 57 1 23 81 13.4% 21 2 PFS 689 319 386 1,394 24.1% 983 113 Risk Mgmt. 38 - 29 67 16.0% 10 1 Services 182 61 151 394 13.3% 126 40 Transaction Banking 17 - 26 43 15.0% 2 - Total 1,359 459 957 2,775 18.9% 1,569 331

24


Liquidity RiskMooreReport owner: Ide/Steffen

Limit breach at 6/30; waived by BU NA and Group ALCOs

Liquidity Ratios LBC Region NA BU NA Ex-LBCCurrent Current Projected Current Current Projected Current

Status Limit 30-Jun-07 31-Jul-07 Status Limit 30-Jun-07 31-Jul-07 30-Jun-07

1) Liquid Assets/ Volatile Funding P 63% Min 72.1% 72.9% P 50% Min 57.4% 56.9% 44.7%

2) (Liquid and Less Liquid Assets)/ Volatile Funding O 78% Min 75.6% 74.9% O 78% Min 73.7% 72.3% 72.0%

3) Stable Funding/ Non-Liquid Assets P 85% Min 90.9% 98.4% O 91% Min 85.4% 86.5% 73.7%

4) (Liquid and Less Liquid Assets)/ Irr. Commitments P 55% Min 72.0% 68.6% P 25% Min 43.1% 41.9% 31.7%

5) Total Borrowing Capacity/ Pot'l Funding Needs P 100% Min 124.3% 128.4% For informational

6) One Day Turnover/ Average Assets P 20% Max 9.0% 3.7% purposes only -

7) Upstream Reliance Ratio P 15% Max 3.9% 0.8% No Limit

Weekly Funding Position LBC Global Markets/Global Clients26-Jul-07 2-Aug-07 $ Change % Change 26-Jul-07 2-Aug-07 $ Change % Change

Retail Deposits 22,258 22,433 174 0.8% N/ A N/ A N/ A N/ A

GSTS (Trust) Deposits 1,189 923 (266) -22.3% N/ A N/ A N/ A N/ A

Other Deposits 12,478 12,189 (289) -2.3% (1,771) 1,600 3,371 -190.3%

Brokered Deposits 7,656 7,711 55 0.7% N/ A N/ A N/ A N/ A

Unsecured Purchased Funds 54,236 53,144 (1,092) -2.0% 82,052 80,560 (1,491) -1.8%Secured Purchased Funds 16,591 18,540 1,949 11.7% 67,379 70,634 3,255 4.8%

Total Funding Base 114,409 114,941 532 0.5% 147,660 152,795 5,135 3.5%

Comments Group ALCO has set new limits for global liquidity ratios at both LBC and Region NA levels.

Policy level for LBC's Liquid Assets/ Volatile Funding ratio was decreased; LBC is now within limit.

Policy level for Region NA's Liquid and Less Liquid Assets/ Volatile Funding ratio and Stable Funding/ Non-Liquid Assets were increased; Region NA is now out of limit. BU NA ALCO and Group ALCO have temporarily waived the limit breaches for both LBC and Region NA and expect BU NA to bring all ratios back into limit by September 30.

1) Liquid Assets/Volatile Funding (Region NA)

50%60%70%80%90%

100%

Jul-0

6Au

g-06

Sep-

06Oc

t-06

Nov-

06De

c-06

J an-

07Fe

b-07

Mar-07

Apr-07

May-

07J u

n-07

25


Risk Management North America

Enterprise Risk Management DashboardAugust 2007

information is otherwise made publicly available by ABN AMRO

ABN AMRO ConfidentialThe information given in this presentation and given to you orally during the presentation is confidential and proprietary

information and may not be disclosed by you to any third parties without our prior written approval unless such

26


Changes from Last Month

Business RiskBusiness Risk

• Volatile credit markets resulted in minimal July profits with Global Markets and Com’l Real Estate being the most affected.

• Direct sub-prime exposure is small, however our indirect exposure as a lender is significant (American Home exposure – now in bankruptcy).

• Need to address BUNAELS (BU NA ex-LaSalle) disentanglement issues (payroll, tax, etc.)

• Volatile credit markets resulted in minimal July profits with Global Markets and Com’l Real Estate being the most affected.

• Direct sub-prime exposure is small, however our indirect exposure as a lender is significant (American Home exposure – now in bankruptcy).

• Need to address BUNAELS (BU NA ex-LaSalle) disentanglement issues (payroll, tax, etc.)

Risk AppetiteRisk Appetite CMBS securitization resulted in a decline in loans outstanding in July. Cash flow funded exposure within $2.7bln limit at Jul-07 and Supervisory LTV within limit at 2Q07.CMBS securitization resulted in a decline in loans outstanding in July. Cash flow funded exposure within $2.7bln limit at Jul-07 and Supervisory LTV within limit at 2Q07.

Liquidity RiskLiquidity RiskPolicy level for LBC’s Liquid Assets/Volatile funding ratio was decreased, LBC now within limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30.

Policy level for LBC’s Liquid Assets/Volatile funding ratio was decreased, LBC now within limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30.

Human CapitalHuman CapitalNew measure for mid-year reviews indicated strong completion rates. New measure for critical positions with replacements indicates strong readiness in the event of losing critical position incumbents.

New measure for mid-year reviews indicated strong completion rates. New measure for critical positions with replacements indicates strong readiness in the event of losing critical position incumbents.

LOWLOW

LOWLOW

LOWLOW

Emerging RisksEmerging RisksGroup Audit and Risk are identifying and monitoring emerging risks related to the current merger activities. Significant observations as a result of interviewing Management from across BU NA business units have been identified.

Group Audit and Risk are identifying and monitoring emerging risks related to the current merger activities. Significant observations as a result of interviewing Management from across BU NA business units have been identified.

MEDMED

HIGHHIGH

LegalLegal Complex Products – monitoring impact of industry change on market value swapsComplex Products – monitoring impact of industry change on market value swaps MEDMED

Market RiskMarket Risk Global STCG (Strategic Credit Trading Group) experienced substantial losses at which 80% was allocated to Global Markets NA.Global STCG (Strategic Credit Trading Group) experienced substantial losses at which 80% was allocated to Global Markets NA.

MEDMED

Investment RiskInvestment RiskMarket conditions have not been favorable as higher levels of volatility hurt mortgage-backed securities positions and some dealers are selling MBS to raise cash to shore up other positions.

Market conditions have not been favorable as higher levels of volatility hurt mortgage-backed securities positions and some dealers are selling MBS to raise cash to shore up other positions.

MEDMED

27


Changes from Last Month

IT SOX issues greater than 18 months improved to 3 issues from 26 issues last month.IT SOX issues greater than 18 months improved to 3 issues from 26 issues last month.Finance/SOXFinance/SOX

Audit Audit Transaction Banking risk level increased from low to moderate as there have been two less than satisfactory audit reports in the last three months.Transaction Banking risk level increased from low to moderate as there have been two less than satisfactory audit reports in the last three months.

MEDMED

ReputationReputationVirus/Electronic Theft – Increasing expertise of hackers and use of web-based viruses to enable account access and theft puts entire industry at risk. Reputation risk increases if customers determine online banking insufficiently secure.

Virus/Electronic Theft – Increasing expertise of hackers and use of web-based viruses to enable account access and theft puts entire industry at risk. Reputation risk increases if customers determine online banking insufficiently secure.

MEDMED

LOWLOW

28


ERM DashboardKey Risk Indicators Common Emerging Risk Themes

BU NA* Key Performance Indicators

Bulger/KillipsReport owner: Daw

NOTE: 2007 Target adjusted for reclassification of Mortgage gain to Disc. Ops.

Full year Forecast adjusted for impact of WorldCom settlement, unanticipated GM severance and bonus payouts for 2006, and retention

Revenue growth excludes 2006 Talman Settlement

Full Year Forecast 2007 and Target exclude TEA

Forecast 2007 includes Jun-YTD Actuals and Jul-Dec Forecast

*excludes Global Clients

Overall BU NAJun-07

YTDForecast

2007 StatusReturn on ARC 25.1% 20.7% √Efficiency Ratio 64.6% 65.4% √Total Rev Growth (YOY) 7.9% 2.3% √

• Personnel Most commonly cited concern was accelerated loss of key personnel and the inability to replace them. Implications noted were inability to meet service and financial performance goals.

• Operations Common theme is that quality of controls will decline due to loss of qualified staff and/or existing staff distracted by merger news. Capacity and flexibility to handle change, recover from problems, and maintain security will be diminished.

• CustomersConcerns were loss of customers and difficulty in attracting new clients (or expanding existing relationships) due to going concern issues. Customer losses increasing due to departure of relationship managers and poaching by competitors.

Com'l PFS GSTS Total

Business – – – – – – – – – – –

Credit – – N/A N/A √ N/A N/A N/A N/A N/A –

Operational √ √ √ – √ √ √ √ √ – –

Market N/A N/A N/A – √ N/A N/A N/A N/A N/A √

Interest N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A √

Liquidity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A √

Investment N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A –

Strategic ! ! ! ! ! ! ! ! ! ! !

Compliance – – √ – – √ √ – – ! –

BU NA - RWA ! √ √ √ √ √ √ √ √ √ !

Human Cap. – – √ – TBD √ √ √ TBD √ √

Services √ √ √ √ √ √ √ √ √ √ √

Legal – – – – – – – – – – –

Finance/SOX N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Audit ! ! – ! TBD ! √ – TBD ! TBD

Global Clients

Transaction

Banking

Private Clients Services

Qu

alit

ativ

e R

isk

ALMAsset Mgmt.

Qu

an

itat

ive

Ris

k

GlobalMarkets

29


Strategic Business ReviewMooreReport owner: Gehring

Metrics are in place to monitor any potential increased risk in the organization due to SBR initiatives. To date, there has not been a significant decline in any of the key metrics.

$14,2136/0701/07Gross Value of Losses, Month to Date (Threshold of $5,000)GSTS

100%6/0796.9%6/06Essbase Availability (meeting SLA)Finance

831,4346/29/07863,45312/31/06Number of Retail Checking AccountsMarketing

167/18/07 YTD157/10/07 YTDRetention List ResignationsHuman Resources/ Training

16/0701/07Number of Operational Risk Management Events (Month to Date, Threshold Indicator of $5,000)

GSTS

94%6/0790%1/07% of Service Requests Closed w/in48 hours (Treasury Mgmt)Transaction Banking

3%6/073%1/07% of Abandoned Calls (Treasury Mgmt)Transaction Banking

5.5%7/9/079.7%11/16/06Past Due Annual Renewals (UCR 4- and Worse)Commercial/ Specialty Banking

7.1%7/9/076.4%11/16/06Past Due Annual Renewals (UCR 0 -4)Commercial/ Specialty Banking

5766/071,2126/06Commercial Bnkg. Critical Document ExceptionsCommercial/ Specialty Banking

$36.8 mln6/30/07 YTD$30.2 mln6/30/06 YTDCommercial Net Charge Offs ($ mln)Commercial/ Specialty Banking

$104 mlnQ2 2007($1,547) mlnQ2 2006Net Upgrades/Downgrades, excluding CRE ($ mln), [+ is good] Commercial/ Specialty Banking

$38,4416/07$88,2211/07Gross Value of Losses, Month to Date (Threshold of $5,000)Services


Services

6/07

6/07

3/07

6/07

6/07

Date of Metric

6/06

6/06

5/06

6/06

6/06

Date of Metric

Personal Financial Services





Business Unit

5341Sales Per Banker Per Month

7%7%Call Center – Abandoned Calls

75% of calls62% of callsCall Center - % of calls answered in 20 seconds or less

$187k$1,543kIndicator of Teller Errors ($ Amount of Shortage/ Overage/ Overall Fraud)

1,9141,590Teller Transactions Per Week

Post-SBR MetricPre-SBR MetricMetric

$14,2136/0701/07Gross Value of Losses, Month to Date (Threshold of $5,000)GSTS

100%6/0796.9%6/06Essbase Availability (meeting SLA)Finance

831,4346/29/07863,45312/31/06Number of Retail Checking AccountsMarketing

167/18/07 YTD157/10/07 YTDRetention List ResignationsHuman Resources/ Training


GSTS

94%6/0790%1/07% of Service Requests Closed w/in48 hours (Treasury Mgmt)Transaction Banking

3%6/073%1/07% of Abandoned Calls (Treasury Mgmt)Transaction Banking

5.5%7/9/079.7%11/16/06Past Due Annual Renewals (UCR 4- and Worse)Commercial/ Specialty Banking

7.1%7/9/076.4%11/16/06Past Due Annual Renewals (UCR 0 -4)Commercial/ Specialty Banking

5766/071,2126/06Commercial Bnkg. Critical Document ExceptionsCommercial/ Specialty Banking

$36.8 mln6/30/07 YTD$30.2 mln6/30/06 YTDCommercial Net Charge Offs ($ mln)Commercial/ Specialty Banking

$104 mlnQ2 2007($1,547) mlnQ2 2006Net Upgrades/Downgrades, excluding CRE ($ mln), [+ is good] Commercial/ Specialty Banking

$38,4416/07$88,2211/07Gross Value of Losses, Month to Date (Threshold of $5,000)Services


Services

6/07

6/07

3/07

6/07

6/07

Date of Metric

6/06

6/06

5/06

6/06

6/06

Date of Metric






Business Unit

5341Sales Per Banker Per Month

7%7%Call Center – Abandoned Calls

75% of calls62% of callsCall Center - % of calls answered in 20 seconds or less

$187k$1,543kIndicator of Teller Errors ($ Amount of Shortage/ Overage/ Overall Fraud)

1,9141,590Teller Transactions Per Week

Post-SBR MetricPre-SBR MetricMetric

30



Group Audit and Risk are identifying and monitoring emerging risks related to the current merger activities. As a result of interviewing Management from various BU NA business

units, the following significant observations were identified:

• Lack of clarity around AANA organization could cause process and control weaknesses in AANA post legal day 1.

• Concerns noted that some business-as-usual activities that continue to occur may lack relevance (e.g., budget adjustments for 2007, RSAs, special projects that may or may not be sustainable post-split) and take focus away from the transition.

• Key resources may be over-stretched for transition activities. Talented resources are being pulled into transition activities, leaving a lack of focus over business-as-usual activities. Uncertainty continues to impact morale.

• Significant tax implications exist from the unwinding of entities staying and going.

• Uncertainty regarding Bank of America’s views on relationship banking. Concerns were noted regarding the ability of the Bank to service clients as they do today and the retention of relationship management teams.

31


Business RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private

Clients Services Total

Business Risk – – – – – – – – – – –

MooreReport owner:Tannenbaum

General Assessment: AMBER

Our central expectation is for continued expansion.— Economic growth rebounded solidly in the second quarter. Exports were a highlight; foreign economies are performing very well.— Housing is enduring a "double-dip," with sales still in decline. Sellers in many regions are facing more price concessions.— Credit markets have struggled during the past two weeks, with spreads widening and issues delayed. Liquidity in some sectors is almost completely absent. A flight to quality has brought long-term rates down sharply.— Most analysts view this as a temporary repricing of risk that will normalize. If the paralysis persists, however, it would represent a significant problem for the economy.— The strong job market should limit contagion to consumers. The Fed is not likely to react to recent market events in the near-term.

Possible Risk ScenariosExcessive supply creates steep (>10% nationwide) downward pressure on home prices. Reduced home equity causes consumer retrenchment.

Investors struggle to overcome recent aversion to risk. Credit spreads widen further; new issues stack up; market liquidity becomes tight.

— Weak spending initiates production cutbacks— Important equity market correction— Rising unemployment— Mild to moderate recession; potential financial dislocations

— Significant losses in a range of investment sectors— Potential contagion to financial institutions— Firms pull back from investments and hiring— Negative impact on consumer spending

Housing Correction Becomes Crash

Extended Credit Crunch

Energy Supply Shock Geopolitical events (terrorist attack on production, stress between Russia and the West) conspire to raise the price of crude to over $100 per barrel

— Inflation rises dramatically; consumers retrench— Federal Reserve takes a hard line to restrain the price level— Potential failure of agents trading in the energy markets— Transportation sector hit very hard

GDP Trends & Forecast

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07

Yield (%)

Forecast

Forecast

Employment Trends

-300

-200

-100

0

100

200

300

400

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-070

1

2

3

4

5

6

7

New Payroll Jobs (left) Unemployment Rate (right)

PercentThousands

Employment Trends

-300

-200

-100

0

100

200

300

400


1

2

3

4

5

6

7


PercentThousands

Employment Trends

-300

-200

-100

0

100

200

300

400


1

2

3

4

5

6

7


PercentThousands

Inflation Trends

0.0

1.0

2.0

3.0

4.0

5.0


CPI

CPI CORE

Y/Y Percent Change Forecast

32


Business Risk MooreReport owner:Tannenbaum Com'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Business Risk – – – – – – – – – – –

Focus Areas

Regional Trends

Housing Market

6.0

6.5

7.0

7.5

8.0

8.5

9.0


175

200

225

250

Sales (left) Prices (right)Million units 000s $

Credit Default Swap Costs125 Company Composite, Investment Grade

0

10

20

30

40

50

60

70

80

90

100

5/1 5/15 5/29 6/12 6/26 7/10 7/24

Bas

is P

oin

ts

Manufacturing Activity

-4

-2

0

2

4

6

8


40

45

50

55

60

65

70

Industrial production, YOY - left Chicago PMI - right%

Unemployment by State

3.0

4.0

5.0

6.0

7.0

8.0


Per

cen

t R

ate

National Michigan Illinois Ohio

Home Prices YOY

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%


Cleveland Detroit Chicago National

Regular GasolinePrice per Gallon

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50


33


U.S. Default Surveillance Tool Kit*In July, the US distress ratio increased to 0.9% from its all-time low of 0.8% in June. One year ago the distress ratio was 3.2%. Distress across sectors appears consistent in recent months. In the US, healthcare and retail/restaurant

sectors displayed the highest propensity for distress.

Recommendation: Monitoring changes in economic, financial, and credit variables that go into the default surveillance tool kit offers a valuable insight into the default outlook. A rising distress ratio signals an increased need for capital and could act as a precursor to more defaults if accompanied by a credit crunch.


Unemployment rate, slope of yield curve, corporate profits, and Standard and Poor’s outlook distribution are inputs into the Standard and Poor’s U.S. speculative-grade default rate forecast model. Risks to the default rate reflect a one-year time horizon for all variables aside from the distress ratio, which reflects a nine-month time horizon. Source: Standard and Poor’s Global Fixed Income Research.

decline in

default rate

small change in

default rate

increase in

default rate

*Published monthly

Unemployment Rate

Fed Survey on Lending Conditions

Industrial Production

Slope of the Yield Curve

Corporate Profits

Equity Market Volatility (VIX)

High Yield Spreads

Interest Burden

Distress Ratio

S&P Outlook Distribution

Ratio of Downgrades to total Rating Actions

Proportion of SG issuance rated B- or lower

Change

Credit Environment

July 2007June 2007

Economic Indicators

Financial Indicators

Economic Indicators

Financial Indicators

Credit Environment

34


Stress Cases

Stress Testing is a fundamental component of enterprise risk management. A Bank is expected to conduct periodic stress tests to evaluate the potential effects on it’s financial condition of a specific event and/or movement in a set of (financial) variables.

Below are the results of a modified “2001 recession” scenario stress test (modified to be more board base than the 2001 recession).

Credit’s expected loss increases $370 million, partially offset by $128 million of interest rate and market risk gains.

Recommendation: Further conform modeling methodologies and techniques, create documentation per P-GRC formal stress testing policies, include conclusions/mitigation based on results, establish a formal oversight function and governance structure.

BulgerReport owner: Widuch

Enterprise wide stress testing is in the developmental stage across the industry. The results below are an enterprise wide stress test for BU NA under 2007 EC methodology. Currently working on a worst case

scenario based on merger.

Economic capital under stress grows to $8.5bln, in excess of Tier I capital as well as BU NA’s PfC economic capital figure of $6.3bln. The $2.1bln excess is significant, but is overstated in that it can be assumed management would intervene via risk/capital reduction activities (CLOs, hedges, swaps, etc.) and/or shrink the balance sheet to manage this figure.

Next Stress Test: Oct-07

($mlns)

Risk TypeBase Line

Stress Test

Net Increase

Percent Increase

Net Increase

Percent Increase

Non-Retail Credit Risk 3,118 4,838 1,720 55% 345 12%Retail Credit Risk 452 595 143 32% 25 45%All Other Modeled Risk 1,341 1,341 n/a n/a (128) n/aModeled Risk - Sub Total 4,911 6,774 1,863 38% 242 n/aCapital for Un-modeled Risk 1,228 1,694 466 38%Total Assigned Capital 6,139 8,468 2,329 38%

Economic CapitalExpected Loss /

P&L Impact

35


Risk Appetite

Recommendation: Continue to monitor Cash Flow portfolio and Supervisory LTV on a monthly basis. Cash Flow funded exposure within $2.7bln limit at Jul-07 and Supervisory within limit at 2Q07. Risk monitoring Eagle Pipeline statistics on a weekly basis.


BU NA Trading Risk VaR Exposure Top 10 (Jul-07)

Changes in the loan portfolio have been more volatile in 2007; CMBS securitization resulted in July decline

($4)

($2)

$0

$2

$4

$6

$8

Feb-06 May Aug Nov Feb May

Ch

ang

e ($

bln

s)

($125)

($100)

($75)

($50)

($25)

$0

$25

$50

$75

$100

$125

To

tal

Lo

ans

($b

lns)

Commercial Global Markets/Clients PFS Other Total

BU NA Loans Outstanding – Trend & Change*BU NA Loans down 4.1% form YE06

Source: Essbase (LOB Mgmt cube) *Graph excludes NAT RES Sale

24%

9%7% 7%

0%

5%

10%

15%

20%

25%

30%

Real Estate Public Sector General Retailers IndustrialEngineering

% o

f E

C

Industry Clusters exceeding 6% of BU NA EC (May-07)

Credit Risk, 3,379 ,

73.8%

Interest Rate Risk,

84 , 1.8%

Operational Risk,

705 , 15.4%

Business Risk,

360 , 7.9%

Market Risk, 53 ,

1.2%

EC by Risk Type ($000) – 2Q07

Current Exposure Limit % of usage 10 Day VaR**

Distressed Security Trading 5,238,242 10,000,000 52% 16,564,777

TRAM - Inflation CD Hedge Portfolio 4,603,166 8,160,000 56% 14,556,488

LOCAL MARKETS TRADING 4,429,874 6,800,000 65% 14,008,492

Treasury Risk and Asset Management Trading 2,458,993 7,500,000 33% 7,776,020

MM-Chicago-BANKING 2,280,369 6,800,000 34% 7,211,160

TRAM - Callable CD Hedge Portfolio 1,656,068 5,440,000 30% 5,236,947

LOCAL MARKETS FX TRADING 931,680 2,500,000 37% 2,946,232

Options & Exotics Trading 588,455 4,080,000 14% 1,860,857

ABS Trading 515,220 1,360,000 38% 1,629,270

Swap Trading desk 417,030 6,800,000 6% 1,318,764* Please note that VaR is not a worst case scenario, it a statistical risk measure, which the bank has chosen to set at a 99% confidence interval. It is based on the last 400 business days and might therefore be understating the risk if the volatility in the financial market substantially increases vs. this observed period.** The 10 day VaR is shown for information and comparison purposes only and does not represent an official calculation.

Value at Risk (in USD)*

36


Credit RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Credit Risk – – N/A – √ N/A N/A N/A N/A N/A –

“Investors alternately focus on concerns like sub-prime loans and rising energy prices and positives like low unemployment, low interest rates and still-growing corporate profits resulting in a turbulent stock market.” NY Times


*Source: Goldman Sachs CDS Market Recap**KMV = change in EDF (Expected Default Factor)

*source: markit.com

0.51%0.47% 0.46% 0.47%

0.36% 0.36%

0.20% 0.20%0.24% 0.25% 0.23%

0.20%

0.21%0.24%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

EL

/EA

D

Commercial (LBC) Commercial (BUNA) Retail

EL/EAD Trend

-$8,000

-$6,000

-$4,000

-$2,000

$0

$2,000

$4,000

$6,000

$8,000

1Q06 3Q Commercial

1Q07 1Q06 3Q CRE

1Q07 1Q07 X-WCSCom'l

Co

mm

itm

ents

($m

lns)

Upgrades (1-2) Upgrades (>2) Downgrades (1-2)Downgrades (>2) Net

Recommendation: Continue to monitor upgrades and downgrades closely, on a monthly basis. Upgrades have outpaced downgrades in the Commercial portfolio in 2007 as last year credit quality was satisfactory. The improved performance has been picked up by MRA and has resulted in better risk ratings. Majority of upgrades in 1 to 2 notch category which is inline with stable economic conditions.

Jun May

5year CDS 1m chg EDF EDF

Consumer Products 48.7 18.0 0.33 0.36Cyclicals 132.2 62.5 n/a n/aFinancials 117.4 62.5 0.43 0.38Healthcare 38.0 18.5 0.39 0.32Industrials 90.0 36.0 0.18 0.18Insurance 63.9 35.5 0.06 0.06Metals & Mining 37.5 1.0 0.31 0.31Oil and Gas 41.7 17.8 0.49 0.46REITs 70.0 47.0 0.05 0.05Retail 89.2 40.7 0.16 0.15

Jul 31CDS Mkt Recap* KMV**

0.0%

1.0%

2.0%

3.0%

4.0%

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

First Mortgages Second Mortgages Consumer Loans SME

Retail 90DPD Trend

Non-Retail Upgrade – Downgrade Trend by Quarter

First mtg. trend = post sale

37


Credit Risk

0%

10%

20%

30%

40%

50%

60%

70%

YE02 YE03 YE04 YE05 YE06 1Q07* 2Q07*

Special Mention Total Classified

Trend in Criticizes Assets to Capital

0

10

20

30

40

50

60

70

80

90

YE01 YE02 YE03 YE04 YE05 1Q06 2Q06 3Q06 YE06 1Q07

%

Total Crit/Capital

Peer Crit


BU NA Criticized Exposure/Adj Capital

*2007 includes Large Corporate. Non-Accrual outstandings used for nonaccrual exposure for Large Corporate.

LBC Criticized Exposure/Adj Capital

*Peer source OCC, peers are OCC Large Bank Program

LBC and peer criticized/adj capital ratios both increasing slightly while the classified ratio is converging

Com'l PFS GSTSGlobal

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Credit Risk – – N/A – √ N/A N/A N/A N/A N/A –

0%

10%

20%

30%

40%

50%

60%

70%

YE02 YE03 YE04 YE05 YE06 1Q07* 2Q07*

Special Mention Total Classified

*2007 includes Large Corporate.

BU NA Criticized Outstanding/Adj Capital

Trend in Classified Assets to Capital

0

5

10

15

20

25

30

35

40

45

50

YE01 YE02 YE03 YE04 YE05 1Q06 2Q06 3Q06 YE06 1Q07

%

Clfd/Capital

Peer Clfd

LBC Classified Exposure/ Adj. Capital

38


Operational RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Operational √ √ √ – √ √ √ √ √ – –

BulgerReport owner: Wajda

4

7

6

2

3

5

1

2007 “Expected”

Region Ranking

176,531,6427Damage to Physical Assets

9,620,8776Employment Practices & Workplace Safety

18,261,4635Internal Fraud

13,259,2614External Fraud

1,250,763,9373Clients, Products & Business Practices

17,802,3392Business Disruption & System Failures

49,526,5641Execution, Delivery & Process Management

BUNA ORAP & RSA Residual Risk

Ranking

2007 “Tail” Region

Loss Amount

Risk Event Type

4

7

6

2

3

5

1

2007 “Expected”

Region Ranking

176,531,6427Damage to Physical Assets

9,620,8776Employment Practices & Workplace Safety

18,261,4635Internal Fraud

13,259,2614External Fraud

1,250,763,9373Clients, Products & Business Practices

17,802,3392Business Disruption & System Failures

49,526,5641Execution, Delivery & Process Management

BUNA ORAP & RSA Residual Risk

Ranking

2007 “Tail” Region

Loss Amount

Risk Event Type

Anticipated In

25

50

75

90

95

99 99.9

99.9

5100,000

1,000,000

10,000,000

100,000,000

1,000,000,000

10,000,000,000

Percentile

Operational Risk Profile for 2007

(Simulated using Internal and External Data)

Anticipated Increase in “Expected” Operational Risk Loss

In reaction to the pending acquisition and SBR, we do anticipate some increase in “expected” losses, but do not anticipate increased “tail” losses.

While Execution, Delivery and Process Management has the greatest frequency of operational loss, the businesses need to also focus on Client, Product and Business Practice events as these losses potentially have the greatest financial impact.

Business as usual risk assessments and simulated loss expectations indicate potential operational losses to be most frequent for Execution, Delivery and Process Management events. Top 3 event types from risk assessment tools make up 96% of total high and medium residual risks identified (Execution, Delivery and Process Management events (52%); Business Disruption and System Failures (31%); and Clients, Products and Business Practices (13%)).

39


Market RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Market N/A N/A N/A – √ N/A N/A N/A N/A N/A √

BulgerReport owner: Bakker

Recommendation: MRM NA is taking steps together with its colleagues across the globe to enhance the transparency of globally run trading books.

North American Total Trading VaR exposure (7/1 to 7/31)

-15

-10

-5

0

5

10

7/2 7/5 7/10 7/13 7/18 7/23 7/26 7/31

Va

R / P

&L

(E

UR

m

io

)

DailyVaR

HypoP&L

ActualP&L

Stress Scenarios for the regional NA Trading Books per 31-Jul Market Risk Comments

The average Market Risk VaR increased slightly with 0.2 mio over the last month, mostly due some more positions taking in the middle of the month. The average VaR for the period under review was EUR 6.5mm.

The Market Risk indicator for Global Markets has been changed to amber, since the Global SCTG desk (Strategic Credit Trading Group) experienced substantial losses of which 80% was allocated to Global Markets NA. The market risks of this Global SCTG desk are monitored and controlled centrally in London and are not included in the above numbers and graph.

Stress Scenario TotalBLACK MONDAY (58,796,235) BOND CRISIS (1,308,824) EMERGING MARKET CRISIS (3,412,989) EMS CRISIS (2,020,456) FINICIAL MARKET CRISIS 1998 (42,986,441) SEP11 (9,001,019)

40


Interest Rate Risk

In compliance with all limits.

Recommendation: Continue to monitor

Source: BU NA ALM

MooreReport owner: Tannenbaum


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Interest N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A √

Proforma as of 7/31/07 Position Status Limit CommentsEarnings Risk Risk positions are proforma as of 7/ 31/ 07.Rates Rise 6 mth -1.6% P -12% "Neutral" duration is defined as 3.7 years; deviations

1 yr 0.0% P -12% between official month-end duration and neutral level typically 2 yr 1.1% P -12% attract economic capital.

Rates Fall 6 mth -0.6% P -12% BU NA duration of 3.4 years includes 0.3 years from Global Markets1 yr -0.5% P -12% and 3.1 years from LBC.2 yr -0.9% P -12% BU NA duration of 3.4 years at 7/ 31/ 07 vs 3.6 years at 6/ 30/ 07

YC Flattening 6 mth -0.3% P -12% reflects:1 yr 0.2% P -12% basis point decrease in long-term interest rates in J uly2 yr 0.6% P -12% which caused duration to shorten by 0.5 years.

Market Value Risk Steering transactions to adjust overall duration.Rates Rise -2.1% P -5% The majority of the Duration decrease occurred at the 5 yrRates Fall 1.3% P -5% "partial" bucket.YC Flattening -0.2% P -5%Optionality Risk -0.4% P -3%PV01 (in millions) -3.8 P -7.9

Market Value % Change

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

-100 -50 0 50 100

Parallel Rate Shock (bps)

(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

5.0

Partial Durations

Partial Durations 0.3 0.0 0.4 0.2 2.7 (1.6) 0.7 0.7 0.0 3.4

PV01 0.4 0.0 0.5 0.2 2.9 (1.7) 0.7 0.7 0.0 3.8

3 Mo 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr 20 Yr 30 Yr Oth Tot

41


Liquidity Risk MooreReport owner: Tannenbaum

Recommendation: Continue to monitor.

Limit breach at 6/30; waived by BU NA and Group ALCOs


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Liquidity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A √

Liquidity Ratios LBC Region NA BU NA Ex-LBCCurrent Current Projected Current Current Projected Current

Status Limit 30-Jun-07 31-Jul-07 Status Limit 30-Jun-07 31-Jul-07 30-Jun-07

1) Liquid Assets/ Volatile Funding P 63% Min 72.1% 72.9% P 50% Min 57.4% 56.9% 44.7%

2) (Liquid and Less Liquid Assets)/ Volatile Funding O 78% Min 75.6% 74.9% O 78% Min 73.7% 72.3% 72.0%

3) Stable Funding/ Non-Liquid Assets P 85% Min 90.9% 98.4% O 91% Min 85.4% 86.5% 73.7%

4) (Liquid and Less Liquid Assets)/ Irr. Commitments P 55% Min 72.0% 68.6% P 25% Min 43.1% 41.9% 31.7%

5) Total Borrowing Capacity/ Pot'l Funding Needs P 100% Min 124.3% 128.4% For informational

6) One Day Turnover/ Average Assets P 20% Max 9.0% 3.7% purposes only -

7) Upstream Reliance Ratio P 15% Max 3.9% 0.8% No Limit

Weekly Funding Position LBC Global Markets/Global Clients26-Jul-07 2-Aug-07 $ Change % Change 26-Jul-07 2-Aug-07 $ Change % Change

Retail Deposits 22,258 22,433 174 0.8% N/ A N/ A N/ A N/ A

GSTS (Trust) Deposits 1,189 923 (266) -22.3% N/ A N/ A N/ A N/ A

Other Deposits 12,478 12,189 (289) -2.3% (1,771) 1,600 3,371 -190.3%

Brokered Deposits 7,656 7,711 55 0.7% N/ A N/ A N/ A N/ A

Unsecured Purchased Funds 54,236 53,144 (1,092) -2.0% 82,052 80,560 (1,491) -1.8%Secured Purchased Funds 16,591 18,540 1,949 11.7% 67,379 70,634 3,255 4.8%

Total Funding Base 114,409 114,941 532 0.5% 147,660 152,795 5,135 3.5%

Comments Group ALCO has set new limits for global liquidity ratios at both LBC and Region NA levels.

Policy level for LBC's Liquid Assets/ Volatile Funding ratio was decreased; LBC is now within limit.

Policy level for Region NA's Liquid and Less Liquid Assets/ Volatile Funding ratio and Stable Funding/ Non-Liquid Assets were increased; Region NA is now out of limit. BU NA ALCO and Group ALCO have temporarily waived the limit breaches for both LBC and Region NA and expect BU NA to bring all ratios back into limit by September 30.

1) Liquid Assets/Volatile Funding (Region NA)

50%60%70%80%90%

100%

Jul-0

6Au

g-06

Sep-

06Oc

t-06

Nov-

06De

c-06

J an-

07Fe

b-07

Mar-07

Apr-07

May-

07J u

n-07

42


Investment Portfolio RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Investment N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A –

MooreReport owner: Tannenbaum

Recommendation: Continue to monitor, currently compliant with all limits.

Market conditions have not been favorable as higher levels of volatility hurt mortgage-backed securities positions (because we are short options) and some dealers are selling MBS to raise cash to shore up other positions.

* AMP less Funding results also include the Actively Managed Portion of the AABS portfolio starting in April

Portfolio is fully invested (constrained by Risk Weighted Assets) AMP (Actively Managed Portfolio) performance has been negatively impacted by year-to-date

performance of mortgage securities. View is that mortgage assets will return to long-term performance expectations.

Position Status Limit

0.15 P 0.54/ -0.46 J un-YTD Jun-07 Jun-YTD Jun-07 Jun-YTD

-0.017 P -0.030 AMP 16,724 -617.50% 146.50% (65,225) -0.160%6.55 P 8.00 Other Agency 4,423 112.20% 420.90% (97,083)

-37.74 P -40.00 MuniTOPS 7,591 1437.70% 5501.00% 25,342

15,296 P 17,000 Municipals 0 20.00% 10.40% 5,643Other/ Collateral 1,428 -45.20% 414.70% 266Total IP 30,166 907.20% 6493.50% (131,057)

74% P 200% Max BOLI 1,706 212.30% 1209.20% 0

Actual AAA ($) AA ($) AA- ($) A ($) BBB ($) No Rating ($)

1,404.6 1,404.6

14,440.9 14,440.9

3,275.1 3,274.9 0.2

429.0 429.0

4,481.1 4,481.1

337.1 306.3 12.0 18.8

1,629.4 1,629.4

6,012.6 5,893.1 108.6 10.1 0.8

791.3 0.0 791.3

1.1 (0.0) 1.1

551.0 551.0

33,353.3 32,410.3 120.8 18.8 10.1 - 793.3

RoARCPortfolio Risk Summary as of 06/30/07

24,813 P 35,000

Policy Hedged PortfolioAMP Effective Duration (%)

AMP CV01 ($ millions)

AMP Mtge Spread Duration ($ millions)

US Treasury and Agency

Agency MBS

Avg Settled Bal. (Millions)

Total Mtge Concentraion (MBS +

Mtge Loans) ($ Millions)

12 Mo. Turnover (AFS Sales/ Avg Bal) (%)

Total MBS Concentration ($ millions)

AMP Volatility Duration ($ millions)

PLMBS

CMBS

SBA

Student Loan Security

Unrealized Gain/Loss

AMP less Funding

Trading

Total

Investment Portfolio Credit Rating Composition: Jun 2007(In Millions)

Municipals - Escrowed

Municipals - Non-Escrowed

FRB & FHLB Stock

Foreign Bonds

43


Capital Management MooreReport owner: Lentino

Recommendation: BU NA should maintain a contingency plan of short-dated relief actions that can be quickly executed should clearinghouse capacity be unavailable in a given quarter.

- Actual, budget and forecast figures for RWA reflect BU NA on a standalone basis (i.e. excluding GM and GC)

- Actual, budget and forecast figures are pro-forma to reflect the sale of AAMG

• BU NA is pursing a strategy of using the CMG global capital clearinghouse capacity wherever possible to stay within its capital budget limits. Forecasting of RWA numbers continues to improve.

BU NA RWA Trend RoARC by Line of Business

-Return on ARC figure for North America includes returns from Global Clients and Global

Markets segments in addition to BU NA.


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


BU NA - RWA ! √ √ √ √ √ √ √ √ √ !

20% 18%

184%

11%

119%

47%

27%

€ 0

€ 20

€ 40

€ 60

Com

mer

cial

Ban

king P

FS

ALM

GS

TS

Glo

bal

Clie

nts

Glo

bal

Mar

kets

RW

A in

Eur

o B

lns

0%

50%

100%

150%

200%

RoA

RC

by

LOB

RWA by LOB Return on ARC Total Return on ARC

€ 60,000

€ 65,000

€ 70,000

€ 75,000

€ 80,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Eur

o m

lns)

BU NA RWA Budget BU NA RWA Forecast BU NA RWA Actual

44


Compliance RiskCom'l PFS GSTS

Global

Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Compliance – – √ – – √ √ – – ! –

Risk ratings presented below are based on net residual risks from the Compliance Risk Assessment Methodology (CORe). The above “Compliance Risk” row reports the highest risk rating carried upward from grid.

Recommendation: Action plans have been developed to mitigate the high risks noted in the Compliance Risk Assessments. Compliance will be monitoring, tracking and reporting on the action plans.

BiernReport owner: Moffitt

CORe MethodologyAn evaluation of Inherent Risk (High, Medium, or Low) and the Quality of Risk Management (Satisfactory or Needs Improvement) was made by the Business Unit Compliance Officers. Residual Risk (noted above) is the risk that remains after consideration of the Quality of Risk Management on mitigating Inherent Risk. Residual Risk may be High, Medium or Low. The risk assessment of all Compliance obligations relating to products/services within a particular business unit were concurred with by business unit management. Risk ratings in the grid above represents the professional judgments of the respective Business Unit Compliance Officers.

High Risk CategoryIT has a High risk in Dealing with Customers with regards to Client Confidentiality -Gramm Leach Bliley Act (GLBA) - Protection and Privacy of Customer Information. The GLBA risks are related to information security, current use of production data in a testing environment and consistent controls over change management.

Updates: Although no other Regulatory Categories are rated High, a High risk rating exists within the following sub-category and Business Unit: AML Risk Assessment/Enhanced Due Diligence/Client Acceptance (Global Markets).

Additionally, the following High risk ratings within these sub-categories and Business Units have been upgraded since the last ERM report and will be reflected in the 2007 iCORe update:• Disclosure Obligations for Retail PFS will be upgraded to Medium. • Regulatory Reporting non-AML for Community Reinvestment Act will be upgraded to Medium. • AML Client Identification and Verification for LaSalle Bank Corp. will be upgraded to Low.

Regulatory Categories Com'l PFS GSTSGlobal

MarketsALM

Asset Mgmt.

Global Clients

Trans. Banking

Private Clients

Services

Medium Medium Low Low Medium Low Low Low N/A High

N/A Low N/A Medium Medium N/A Low N/A Low Low

Medium Medium Low Medium Medium Low Low Medium Medium Medium

Medium Medium Low Medium Medium Low N/A Low Medium Medium

Dealing with Customers

Market Conduct

Anti-Money Laundering

Internal Compliance Systems

45


Human Capital Risk

New measure for mid-year reviews indicates strong completion rates. New measure for Critical Positions with Replacements indicates strong readiness in the event of losing critical position incumbents. For Resignations, amber is coded for increase over July >.5% or red for increase over July >1%. BU NA Human Investment Ratio has continued to decline from Q1, indicating less return on total compensation spend (target is 2.46, was achieved in March). Overall, resignation rates are running in line with last year and less than established industry benchmarks, indicating a stable organization.

VanDerWerffReport owner: S. Kaiser

ABN AMRO Confidential

This information is confidential and proprietary information and may not be disclosed by you to any third parties without prior written approval unless such information is otherwise made publicly available by ABN AMRO

Recommendation: July is a critical month for attention to staff. Leaders are encouraged to reach out to ensure staff concerns are answered before staff resign. Ensure replacement planning is utilized actively managed by the business.

AcceptableWatch: Outside ThresholdWarning: Significantly Outside Threshold

¹ Includes Ex-pats² Data Source: PeopleSoft, July 31, 2007 (Year-to-Date)³ Data Source: Essbase, July 31, 2007 (Year-to-Date)

n/a = Not Available

*Percentage of PFS does not include 3,000 people from the Branch Network, who will complete review cycle at later date.**Global Clients are not included in overall count due to different review cycle.

% staff with approved SMARTS

(as of 7.31)

% staff with mid-year review

(as of 8.6)

Critical positions with Replacements

Retention List

(as of 8.6)

Top performers (Officers + Rated 4-5)

SVPs +Officers -

FVPsExempt/

Prof'lNon-

ExemptHeadcount as of 7.31

Headcountas of 1.30

SBR Staff Reduction

(as of 7.31)

Revenue/FTE

Op Exp/FTE

Human Investment

Ratio

Commercial 98% 96% 95% 10 out of 357 2.7% 1.1% 4.1% 2.0% 0.6% 1763 2144 202 320 170 3.61

Retail PFS 99% 99%* 97% 6 out of 420 0.6% 0.1% 1.0% 1.2% 8.9% 5990 5773 385 68 55 1.69

GSTS 95% 100% 90% 0 out of 80 1.9% 0.0% 2.8% 4.8% 1.5% 888 752 38 127 72 2.39

Global Mkts 98% 74% n/a 0 out of 2 2.1% 0.6% 4.9% 0.9% 0.0% 427 467 40 620 483 1.77

Asset Mgmt 96% 97% 88% 0 out of 1 0.0% 1.1% 2.2% 0.0% 0.0% 68 90 8 182 135 1.58

Global Clients 94% n/a** 100% 0 out of 1 0.0% 0.0% 0.0% 2.1% 0.0% 47 48 2 885 931 0.70

TB 100% 98% 97% 0 out of 42 0.3% 0.0% 1.7% 2.4% 0.7% 304 287 25

Finance 98% 89% 100% 3 out of 94 2.6% 0.5% 4.3% 1.5% 0.7% 471 604 23 96 68 1.8

HR¹ 99% 98% 92% 0 out of 42 1.7% 0.3% 2.0% 2.5% 0.3% 281 357 29

Legal 100% 97% 100% 0 out of 24 3.0% 0.0% 2.2% 0.0% 0.0% 112 135 11

Risk Mgmt 100% 99% 87% 2 out of 39 2.9% 0.5% 3.1% 2.6% 0.5% 286 418 29

Audit 100% 100% 100% 0 out of 16 0.0% 1.0% 4.1% 0.0% 0.0% 95 97 0

Compliance 100% 100% 100% 2 out of 29 0.0% 0.0% 6.0% 1.8% 0.5% 180 217 0

Services 99% 99% 90% 4 out of 353 0.8% 0.0% 0.9% 1.2% 2.7% 2583 2961 150

Svcs Ops n/a n/a n/a 3 out of 263 0.4% 0.0% 0.4% 0.9% 3.6% 1866 2059 9

Svcs Other n/a n/a n/a 1 out of 90 1.6% 0.0% 1.9% 1.9% 0.7% 717 953 141

OVERALL 98% 96% 95% 27 out of 1500 1.2% 0.3% 2.0% 1.6% 4.4% 13495 14350 942

OVERALL BU NA

Managing Performance and Talent²

Human Capital Returns³Resignations (Regretted Turnover)² Managing Headcount²


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Human Cap. – – √ – TBD √ √ √ TBD √ √

46


Human Capital Risk

Qualitative Commentary by HR Business Partners regarding critical staff resignations, including staff from Retention Group (June 12 through August 6, 2007).

VanDerWerffReport owner: S. Kaiser

ABN AMRO Confidential

This information is confidential and proprietary information and may not be disclosed by you to any third parties without prior written approval unless such information is otherwise made publicly available by ABN AMRO

LOB Critical Staff SituationActions to

Mitigate Risk

•Wealth Mgmt •One Senior Private Banker•One SVP, Team Leader

•Both went to Wells Fargo to work with a previous manager due to uncertainty of the transaction

• Both were on Retention List. Accounts have been reassigned internally, with follow-up calls being made to clients.

Critical Staff lost prior to August 6

•Commercial •One SVP

•One Lead Loan Officer

• SVP recruited by RBS in non-compliance with Non-Poaching Agreement

•Lead Loan Officer hired by JP Morgan Chase, with uncertainty that position would continue under BAC

•Work has been reassigned internally.

•Work has been reassigned internally.

•3 Leadership losses•One Managing Director

•GSTS •None within last month •3 Analysts•3 CDO Employees•One Senior Trust Analyst

•Risk Mgmt •One Relationship Manager • Left to take another position outside the Bank

• Work has been distributed to other members of the team.

•Trading Risk Mgmt Group•One loss in Hedge Funds NY

•Four Portfolio managers •One Business Development Officer

•Compliance •None within last month •One Vice President

•Finance •One Analyst • Relocating out of state • Work has been reassigned internally and he has been added to the Retention Group.

•None

•Commercial•Commercial

•Commercial

Previously Reported


Markets ALMAsset Mgmt.

Global Clients

Transaction Bank.

Private Clients Services Total

Human Cap. – – √ – TBD √ √ √ TBD √ √

47


Services RosenthalReport owner: Flom


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Services √ √ √ √ √ √ √ √ √ √ √

Trend Health Comments

Human Resources - T/O and Open Positions

NJ Securities Operations Watch MediumOperations are stabilizing. One individual who recently resigned has rejoined the Bank. Reinforcing retention in other ops. areas.

Services Risk Issues

Application Access Revalidation Status Negative High

IBM's performance is down sharply due to scheduled increases in contracted service levels that occurred in May 2007. The downward trend in service by IBM continued in June but is not accelerating. IBM's performance will be closely monitored to ensure that this is corrected.

Policy Compliance - IT Audit Issues Negative High YTD: 120 new, 124 closed, 71 currently open (20 are SOXA issues).

IBM Vendor Contract Performance Watch Medium

IBM performance is down sharply due to scheduled increases in contracted service levels that occurred in May 2007. The vendor performance will be closely monitored to ensure that this is corrected.

IT Service Disruption (time to restore service) Watch Medium

CashPro was negatively impacted by four incidents that cumulatively caused 8 hours of downtime. This downtime caused the CashPro service to miss its minimum service level. All incidents were network related. There is an ongoing CashPro Improvement Plan that will address these issues. In addition, ACH Web missed the minimum service level due to a related network incident. Online Banking was negatively impacted by one incident that caused 4 hours of downtime. This downtime caused the OLB service to miss its minimum service level.

Significant IT Incidents Stable LowThe year-to-date number of significant incidents continues to trend 40% less than experienced in 2007 than in 2006.

IT Vendors (IBM, Infosys, SyBase, Oracle, etc.) Negative High

Financial risk heightened as a result of commercial disagreements. Items under discussion are: (1) role and functions definitions, (2) deployment of licenses. We have resolved the Sybase dispute. Close to resolving IBM (W2W). FPPA dispute with INF still continues. Oracle and MSFT still being negotiated.

Transition Services Provided to AAMG (NatRes) Stable LowTransition services are stable; both stranded costs and Citi revenue forecast expected to be slightly favorable to budget.

Offshoring to ACES Stable Low Attrition issues under control.

Transaction Banking - Cash Pro BCP/DR Negative HighUnavailability of Internet Point of Presence (IPOP) for CashPro in the event of a Service Center failure.

Services Company - BCP/DR Negative High

1. Unavailability of Internet Point of Presence (IPOP) for the CashPro system in the event of a Service Center failure.2. Recovery of OMR in the event of a 540 Plaza outage is currently not in place.

48


Legal Risk

Recommendation:

RounsavilleReport owner: Taylor


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Legal – – – – – – – – – – –

Operation = risk of error/omission creating possible legal liabilityRegulatory = risk of investigation/fines/penaltiesLitigation = risk of suit by regulatory or third party

Monitor industry best practicesGM/GC, Retail, Mortg, Trans. Banking

Operation, Regulatory, Litigation

Complex Products – monitoring impact of industry change on market value swaps

Support proposals for reasonable legislation. Monitor industry best practices

GM/GC, Retail, Transaction Banking, PFS, GSTS


Assessing impact of regulatory changes on procedures (ie, FACT Act, Credit Agreement Act, Reg R)

External counsel engaged to conduct audit of Fair Labor Standards practices

AllLitigationIncreased Fair Labor Standards Act claims

Enforce current policies concerning collection of ABN issued electronic devices at time of departure

AllReputation, LitigationConfidentiality/privacy concerns (ie, computers/files left by departing staff)

Enforce current policies/ Monitor industry best practices

GM/GC. Retail Regulatory. LitigationInsider dealing/Market Abuse

Actively defend patent troll litigation/ monitor and support proposals for legislative change

AllLitigationIncreased Patent Infringement litigation/issuance of Business Method Patents

Enforce current policies/ Monitor industry best practices.

GM/GC, Retail, TrustOperation, LitigationConflicts of interest/breach of fiduciary duty

Outside counsel engaged to develop improved policies/procedures

AllOperational, LitigationImproving record management policies and procedures to comply with new federal rules

Counsel engaged to advise. New CAAML policies implemented

BANRegulatory, LitigationInvestigations re: AML/KYC issues

Merit based decisions, adverse impact reviews, implementation of uniform severance package

AllOperational litigationRetention/Attrition

Decision made to terminate relationships that are not in compliance with US regulations.

Retail, Asset Management, Private Client, BAN

Regulatory, Reputation, Litigation

Foreign affiliates dealings with US Persons in potential violation of US laws

Mitigation/Potential MitigationAffected Business Lines

Type of RiskIssueRisk Level

Monitor industry best practicesGM/GC, Retail, Mortg, Trans. Banking


Complex Products – monitoring impact of industry change on market value swaps

Support proposals for reasonable legislation. Monitor industry best practices

GM/GC, Retail, Transaction Banking, PFS, GSTS


Assessing impact of regulatory changes on procedures (ie, FACT Act, Credit Agreement Act, Reg R)

External counsel engaged to conduct audit of Fair Labor Standards practices

AllLitigationIncreased Fair Labor Standards Act claims

Enforce current policies concerning collection of ABN issued electronic devices at time of departure

AllReputation, LitigationConfidentiality/privacy concerns (ie, computers/files left by departing staff)

Enforce current policies/ Monitor industry best practices

GM/GC. Retail Regulatory. LitigationInsider dealing/Market Abuse

Actively defend patent troll litigation/ monitor and support proposals for legislative change

AllLitigationIncreased Patent Infringement litigation/issuance of Business Method Patents

Enforce current policies/ Monitor industry best practices.

GM/GC, Retail, TrustOperation, LitigationConflicts of interest/breach of fiduciary duty

Outside counsel engaged to develop improved policies/procedures

AllOperational, LitigationImproving record management policies and procedures to comply with new federal rules

Counsel engaged to advise. New CAAML policies implemented

BANRegulatory, LitigationInvestigations re: AML/KYC issues

Merit based decisions, adverse impact reviews, implementation of uniform severance package

AllOperational litigationRetention/Attrition

Decision made to terminate relationships that are not in compliance with US regulations.

Retail, Asset Management, Private Client, BAN

Regulatory, Reputation, Litigation

Foreign affiliates dealings with US Persons in potential violation of US laws

Mitigation/Potential MitigationAffected Business Lines

Type of RiskIssueRisk Level

49


Reputation RiskIssue Management working group (IMWG) is the BU NA tool for monitoring issues that could have a significant impact

on firm’s reputation.

RounsavilleReport owner: S. Gordy

Functions represented in working group include Legal, Privacy, Civic and Sustainable Development, Business Continuity, Human Resources, Marketing, Office of the President, Operational Risk, and Compliance. Additionally, others are queried regularly.

Public Image· Sale/Merger – The sale of LaSalle to Bank of America presents a host of reputation risks. Customers and clients, employees, and

community groups and leaders all have concerns. Recent story regarding Bank of America ATM fee increase may raise questions.

Public Image

· Litigation Publicity -- Legal dispute resulted in an effort to amend the Illinois Credit Agreements Act. The debate at the state capitol

referenced LaSalle litigation.

· String of incidences – ABN Amro reserve for Justice Department settlement, Federal Reserve AML fine, flood insurance fine,

employee fraud - may be connected by media for reputation damaging new s story. Lifting of Cease and Desist could ameliorate.

Information Privacy

· Data Breach – Transition period and resulting employee attrition create potential loss or exposure of customer data. Privacy office

w orking w ith transition team to mitigate.· Donation/Disposal of Computer Hardware – Transition period may create additional risks related to disposal of used computers,

cellular phones, and PDAs. Privacy office and others w orking to mitigate.

· Viruses/Electronic Theft – Increasing expertise of hackers and use of w eb-based viruses to enable account access and theft puts

entire industry at risk. Reputation risk results if customers determine online banking insufficiently secure.

Consumer Lending

· Mortgage Lending - Subprime market challenges and increased foreclosures industry-w ide have prompted heightened scrutiny by

government and press.

· Student Loans - Investigations by multiple state attorneys general and new spapers have revealed suspect business practices and

questionable relationships betw een some lenders and university financial aid offices. Multiple settlements and headlines in recent w eeks.

50


Finance/SOX

Recommendation: The SOX office tracks these issues weekly and informs management of any significant issues, and the SOX office should continue to do so.


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Finance/SOX N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

The SOX heat map is a summary of individual internal control deficiencies, with regards to financial reporting, that aggregate to potential material issues that should be reviewed by management.

MooreReport owner: Ingwersen

Po

ten

tial

Imp

act

on

Fin

anci

al S

tate

men

tsA

s a

perc

enta

ge o

f AB

N A

MR

O

Gro

up E

arni

ngs

Bef

ore

Tax

Low(up to 1%)

€20 mil

Inadequate controls around application and database security (moved to lower severity due to control gaps being remediated/mitigated with all of the individual gaps being deemed low)

Inadequate monitoring controls around the application of hedge accounting (moved to lower severity due to materiality of accounts deemed to be low after thorough review performed)

Inadequate intercompany account reconciliations controls

Inadequate segregation of duties – identified 4 issues across business and IT (moved to lower severity due to control gaps being remediated/mitigated with 100% of the individual gaps being deemed low)

High( > 5% )

Medium(1% to 5%)

Difficulty Of Remediation

Low Medium High

Managing Board

BU

BU BU

MB Aware

Local Country Local Country

BU

BU BU

Local Country

BU AWARE

Difficulty Of Remediation

Low Medium High

Managing Board

BU

BU BU

MB Aware

Local Country Local Country

BU

BU BU

Local Country

BU AWARE

Key Risks:

IT: There exists 3 IT issues that remain open and have been an ongoing issue for eighteen months:

2 – Access

1 - Other

Attrition of Resources: Process Group Owners, Key Control Resources, and Audit Staff (i.e. no validation that controls are operating effectively)

Maintaining focus in current environment

Insufficient resources for gap remediation

Alignment and/or interdependency issues

Opportunities:

Achieved control reduction of over 50%

Result: less ownership, validation and testing burden

Control sets are streamlined by business process

51


Audit SweitserReport owner: Hyman

Average Age

Total Open Issues

Total Past Due Issues

0

50

100

150

200

250

300

350

400

450

Jul-06 Aug-06

Sep-06 Oct-06 Nov-06

Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Jun-07 Jul-07

Issue TrendsPervasive issues:• Lack of systematic business

management review of access control over applications and adequacy of segregation of functions in automated processes;

• Deficiencies in systems security over IT systems and infrastructure;

• Need of improved control over access to privacy sensitive information

• Need for improved control over sourcing, procurement and payment processes – including control over building and construction projects;

• Need to improve control over end user IT development and maintenance.

Outlook:• Remediation of control deficiencies before

Payments Systems Risk Self Assessment;• Full clarity on rescoping and consequences

of Basel 2 project;• Full clarity on rescoping and consequences

of SOXA project;• Remediate existing SOXA gaps and improve

senior management involvement in walkthrough and sign off - specifically for non-LBC;

• Implementation of new Standards of Conduct and Expense Control policies;

• Adequate management attention for timely and adequate closing of open audit and regulatory issues;

• Understanding end-to-end consequences of SBR impact on processes (focus on changed controls, if any).

Com'lRetail PFS

GSTSGlobal

MarketsCapital Markets

Asset Mgmt.

Global Clients

Trans. Banking

Services Operations

Services IT

Group Functions

Adjusted Assessment of Control Effectiveness ! ! - ! - - - ! ! !

Monthly Control Effectiveness Rating -28 -22 -4 -16 -4 0 18 -14 -28 -36 -32

Average Age of Issues (days) 251 168 180 147 401 148 0 161 239 248 194Total Repeat Issues 4 1 2 1 0 0 0 0 1 6 2Total Reopened Issues 1 1 0 1 0 0 0 0 2 24 3Total Issues with Extensions 14 7 3 1 3 1 0 4 18 11 41Total Past Due Issues 8 3 1 6 2 5 0 6 24 51 34Total Open Issues (H/E/R/M) 22 15 2 9 6 7 0 9 41 85 108Average Issue Rating (Open H/E/R/M) 2.6 2.4 2.5 2.0 2.3 2.3 0.0 2.4 2.3 2.5 2.5Average Issue Ratings-Last 3 Months (H/E/R/M) 2.6 2.0 0.0 2.0 2.3 2.2 0.0 2.3 2.2 2.5 2.3Less Than Satisfactory Audit Reports - Last 3 Months 0 1 0 2 0 0 0 2 3 4 8

Annual Assessment of Control Effectiveness 50 50 50 21 50 38 50 75 43 33 48

Annual Inherent Risk Measured to Regional Significance 83 57 50 100 100 88 100 100 93 67 83

Con

trol

Effe

ctiv

enes

s M

odifi

ers

Assessment of Control

Effectiveness

Legend:

Improving No Change Weakening

! Weak- Average Strong


Markets ALMAsset

Mgmt.

Global

Clients

Transaction

Bank.

Private


Audit ! ! – ! TBD ! √ – TBD ! TBD

Documents

Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA)