Not many people are aware that Bank of America Corporation is operating under a MOU, or Memorandum of Understanding with unnamed regulators.  But it's true, since May 2009.  Hopefully, company directors and senior management not only are aware, but they are operating on the same page. News of the MOU spread like wild fire when it leaked out late Monday - probably because it was news to all, but higher ups at Bank of America.  In fact, BofA Directors were told not too long ago that the company could face a public enforcement action [C-I: whatever that means] if regulators aren't satisfied with recent steps taken to strengthen the bank, according to people in the know. So, why the concern? Well, the MOU is approaching its 3rd anniversary and things little if anything appears to be on the upswing - for BofA and its Wall Street rivals.  The nation's second-largest lender has encountered repeated tussles with regulators over its purchase of firm Merrill Lynch & Co., followed by a downgrade of the company's confidential supervisory rating. The memorandum, or MOU, which isn't public, identified governance, risk and liquidity management as problems that had to be fixed, according to people familiar with the document. Revolving Doors. It probably doesn't help that numerous persons have held key posts since Brian Moynihan became Bank of America's CEO in 2010.  Take, for example, this roster compiled by WSJournal Research:

• Chief Financial Officer: Joe Price, Chuck Noski, Bruce Thompson.
• Chief Risk Officer: Greg Curl, Bruce Thompson, Terry Laughlin.
• Top Legal Officer: Ed O'Keefe, Gary Lynch.
• Strategy Chief: Mike Lyons, Thong Nguyen

While BofA has dealt strictly with pedigree names, regulators nonetheless are telling the Bank of America Board that they wanted to see more progress on the bank's compliance with the memorandum. They also have expressed concern concern about turnover in key management posts.  The latest shake-up was the departure in late October of strategy head Mike Lyons, a member of Mr. Moynihan's inner circle who often served as a liaison between the CEO and the board on certain issues. Not surprisingly, regulators have told BofA that they want to be sure that changes made to governance, risk, capital and credit are permanent and can work over time - because if they aren't satisfied, the informal order could turn into a formal and public action.  This would likely intensify scrutiny and possibly lead to greater restrictions, just as CEO Brian Moynihan tries to shed problems tied to the financial crisis. Reaction to the News. It's not surprising to learn that BofA directors were taken aback, and "put ... on the ground," according to some.  And, as serious as that may seem, it gets worse when one realizes that this threat of an enforcement action is simply the latest flashpoint in a tense relationship between U.S. regulators and Bank of America. Directors believe the bank has met demands set out in the 2009 document, but perception is reality only in the eyes of the regulators.  That point is not lost on the Director who believe it's time for the company to get "out of the penalty box." Intended Direction of Regulators. It's unclear when regulators may decide whether more severe measures are necessary, and what those measures may be.  Some people believe that the regulators could even take the opposite approach and view BofA's moves in a positive light. More Commonplace Than One Would Imagine. Believe it or not, there are 1,042 banks and thrifts currently operating under formal enforcement actions issued since 2007, according to SNL Financial.  That includes cease-and-desist orders, prompt corrective-action notices, capital directives and formal agreement or consent orders. In any case, getting the MOU lifted is a major priority for CEO Moynihan.  Since being established, after the Federal Reserve and Office of the Comptroller of the Currency downgraded their overall ratings of the bank, the Fed has written to BofA saying that "more than normal supervisory attention will be required for the foreseeable future."  And, regulators say they want to be sure that changes made to governance, risk, capital and credit are permanent and can work over time.  A shaky U.S. economy and uncertainty surrounding new global capital requirements add to the concerns. Change as a Constant. However, in addition to the rotation in senior management, Bank of America has, since mid-2009, appointed 8 new directors and made internal changes that range from how it classifies credit to risk and liquidity-management controls. Then, after Mr. Moynihan became CEO in 2010, he began selling noncore assets and preserving capital as a way of shoring up the bank's balance sheet. Which has led to growing frustration as the two sides appear to view Bank of America's progress differently - the Fed doesn't believe BofA has done all the work," while bank officials believe "they have done all the work and the Fed keeps moving the goal line on them." BofA was further blind-sided this past year when, in March, the Federal Reserve rejected a request for a modest dividend increase in the second half of 2011 - after Moynihan had hinted publicly that one was likely. None of this has helped Bank of America shares in the stock markets,which have tumbled 58% this year - the most of any major U.S. banks.  Investors remain worried about the bank's unresolved, and probably indeterminate, exposure to mortgage-related legal costs. Meanwhile, 'BAC' shares dropped yet another 29 cents, or 5%, in trading Monday to $5.49. For further details, go to:   [WSJournal, 11/22/11].