Bank of America (BAC) is downwardly revising its previously disclosed regulatory capital amounts and ratios due to an incorrect adjustment related to the treatment of certain structured notes assumed in the Merrill Lynch acquisition in 2009.
The lender noted that the reduction in regulatory capital amounts and ratios has no impact on the company’s historical consolidated financial statements or shareholders equity, which were properly stated.
In its previously estimated preliminary Basel 3 capital amounts and rations as well as Basel 1 capital amounts and ratios for 2013, the company discovered an incorrect adjustment being applied in the determination of regulator capital related to the application of the fair value option to certain legacy Merrill Lynch structured notes.
“Bank of America will be required to resubmit its capital plan within 30 days, unless that time is extended by the Federal Reserve," the Federal Reserve said. "Bank of America must address the quantitative errors in its regulatory capital calculations as part of the resubmission and must undertake a review of its regulatory capital reporting to help ensure there are no further errors."
As a result, Bank of America is suspending its previously announced 2014 capital actions, including the $4 billion common stock repurchase authorization and the planned increase in the quarterly common stock dividend from 1 cent per common share to 5 cents per share.
“Until receiving notice that the Federal Reserve has not objected to the new capital plan, Bank of America will not be able to increase its capital distributions, including those increases approved during the 2014 CCAR exercise last month,” the Fed said.