8-KOther Events

BANK OF AMERICA CORP /DE/ 8-K Report, Corporate Update (May 27, 2014)

Filed May 27, 2014For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) filed an 8-K on May 27, 2014, to provide an update on its resubmission of capital actions and Comprehensive Capital Analysis and Review (CCAR) schedules to the Federal Reserve. This resubmission follows a prior announcement on April 28, 2014, due to the discovery of an adjustment related to regulatory capital. A third-party review was conducted on the Corporation's CCAR resubmission processes and regulatory capital calculations for the periods ending September 30, 2013, and March 31, 2014. The third-party review found additional adjustments that had a de minimis impact (less than one basis point) on the reported regulatory capital ratios for September 30, 2013, and no impact for March 31, 2014. Importantly, the capital actions included in this resubmission are less than those the Federal Reserve had previously not objected to in 2014. The Federal Reserve has up to 75 days to review these resubmitted items, but the timing and outcome remain uncertain.

Key Highlights

  • 1BAC resubmitted its 2014 CCAR capital actions and schedules to the Federal Reserve on May 27, 2014.
  • 2The resubmission addresses an issue discovered earlier with regulatory capital calculations.
  • 3A third-party review of CCAR processes and capital ratio reporting was completed.
  • 4Adjustments from the third-party review had a de minimis negative impact (<1 bps) on Q3 2013 regulatory capital ratios and no impact on Q1 2014 ratios.
  • 5The capital actions submitted are less than those previously approved by the Federal Reserve.
  • 6The Federal Reserve has up to 75 days to review the resubmitted capital plan.
  • 7There is no guarantee regarding the timing or outcome of the Federal Reserve's review.

Frequently Asked Questions

CCAR stands for Comprehensive Capital Analysis and Review. It is an annual exercise conducted by the Federal Reserve to assess whether large financial institutions have sufficient capital to withstand stressful economic conditions and to approve their capital plans, including dividends and share repurchases. For investors, CCAR results influence the amount of capital that can be returned to shareholders and indicate the bank's financial strength and regulatory compliance.

The filing states that an adjustment to regulatory capital was discovered, necessitating the resubmission. A third-party review was engaged to examine the Corporation's reporting and calculation of regulatory capital ratios for specific periods, which led to further minor adjustments.

The adjustments had a de minimis effect, meaning less than one basis point reduction, on the Corporation's reported regulatory capital ratios for the period ended September 30, 2013. For the period ended March 31, 2014, there was no effect on these ratios. These impacts are considered very small.

This suggests that Bank of America is proposing to return less capital to shareholders (through dividends or share buybacks) in this resubmitted plan compared to what they had initially proposed or what the Federal Reserve had previously not objected to. This could be a strategic decision or a response to regulatory feedback.