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Moody's Investors Service is taking an upbeat view on Bank of America Corp.'s agreement to fork over $8.5-billion (U.S.) after the bank agreed to settle claims associated with mortgage-backed securities. Earlier this month, Moody's had placed the bank's credit rating on review for possible downgrade, largely because of the evolving regulatory climate that has followed the financial crisis.

Wednesday's agreement, though, also feeds into this review and provides evidence of improvement in the bank's financial strength, in Moody's view - yes, even after the big payout.

"The costs incurred are at the high end of the range that Moody's had previously estimated Bank of America might be required to pay to resolve these matters," said David Fanger, Moody's Senior vice president, in a statement. "However, following today's settlement and the announced addition to reserves, Moody's believes that BAC's remaining representation and warranty exposures are no longer a negative credit concern."

Investors love the settlement, driving Bank of America's share price up more than 3 per cent on Wednesday. Still, Moody's still has some outstanding concerns about the bank.

"During the review the rating agency will also consider BAC's exposure to continued litigation costs related to faulty foreclosure practices," its press release said. "Other considerations will include the potential effectiveness of changes in risk management at BAC, given the poor performance during the credit crisis and BAC's still sizable capital market activities, which Moody's views as both opaque and potentially volatile."

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