Bank of America has agreed to pay $2.43bn to settle a shareholder lawsuit brought over its controversial acquisition of Merrill Lynch in the midst of the credit crunch.

Shareholders brought a suit against the bank in 2009 claiming it had misrepresented the financial health of both institutions. In a statement, Bank of America denied the allegations and said it was "entering into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation."

Bank of America agreed to buy Merrill Lynch for $50bn on September 15 2008 – the day Lehman Brothers went bankrupt, triggering the worst financial crisis in a generation.

The move initially won praise for saving Merrill from possible collapse, but investors soon soured as it emerged that Merrill's debts were far worse than first thought, reaching $15.84bn in the fourth quarter of 2008. The bank was also intending to honor $3.6bn in bonuses for Merrill's top executives.

In a scathing memoir released this week, Sheila Bair, the former head of the Federal Deposit Insurance Company, said Ken Lewis, then Bank of America's chief executive, was viewed as "somewhat as a country bumpkin by the CEOs of the big New York banks, and not completely without justification. He was a decent traditional banker, but as a deal-maker his skills were clearly wanting."

As part of the proposed settlement, Bank of America also agreed to improve its corporate governance policies and allow shareholders a non-binding "say on pay" vote of executive remuneration.

"Resolving this litigation removes uncertainty and risk, and is in the best interests of our shareholders," said Brian Moynihan, Bank of America's chief executive. "As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients."

The settlement will be covered by Bank of America's litigation reserves.

Merrill Lynch is not the only credit crisis deal to weigh on Bank of America. The bank bought Countrywide, once the US's largest seller of sub-prime mortgages, for $2.5bn in 2008. That deal, too, has cost the bank tens of billions of dollars in write-offs for bad loans, legal costs and settlements with government agencies.