What is the Supplementary Leverage Ratio (SLR) and why is its expiration significant?

The Supplementary Leverage Ratio (SLR) is a capital adequacy measure that ensures banks hold a minimum amount of capital relative to their total assets. The temporary change implemented in 2020 provided some relief, and its expiration means banks will revert to the previous, potentially stricter, SLR requirements. This is significant as it could impact a bank's ability to leverage its balance sheet.

How does the expiration of the temporary SLR relief affect Bank of America?

According to Bank of America, the expiration of the temporary SLR relief is not expected to significantly affect the company. Their reported SLR of 7.2% (or 6.2% without the relief) was well above the required 5% minimum, indicating they are well-capitalized from an SLR perspective and can continue their operations and capital return plans without constraint.

What does it mean that Bank of America's SLR was above the minimum required ratio?

It means that even without the temporary relief measures, Bank of America held more capital relative to its total assets than the minimum required by regulators. This indicates a strong capital position concerning the SLR, providing a buffer and flexibility for the company's operations and strategic initiatives.

Will this SLR change impact Bank of America's ability to return capital to shareholders?

Bank of America explicitly stated that they do not expect the expiration of the temporary SLR relief to constrain their capital return plans to shareholders. This suggests that their existing capital levels are sufficient to meet both regulatory requirements and their shareholder distribution strategies.

BANK OF AMERICA CORP /DE/ 8-K SEC Disclosure

Summary

Bank of America Corporation (BAC) announced on March 19, 2021, that a temporary change to the supplementary leverage ratio (SLR) for bank holding companies, originally implemented in 2020, will expire as scheduled on March 31, 2021. This expiration is a regulatory development affecting the banking industry broadly, as announced by the Board of Governors of the Federal Reserve System, the FDIC, and the OCC. For Bank of America specifically, the company's SLR was 7.2% as of December 31, 2020. Without the temporary relief, this ratio would have been approximately 6.2%, which was still comfortably above the 5% regulatory minimum. The company's primary subsidiary, Bank of America, N.A., did not utilize the SLR relief. Bank of America stated that the SLR has not historically been a constraint and that the expiration of the temporary relief is not expected to impact its ability to serve customers or constrain its capital return plans to shareholders.

Key Highlights

1Temporary change to the Supplementary Leverage Ratio (SLR) will expire on March 31, 2021.
2Bank of America's SLR was 7.2% as of December 31, 2020.
3Excluding the temporary change, BAC's SLR would have been approximately 6.2%.
4This 6.2% SLR was 1.2% (or $39 billion) above the 5% regulatory minimum.
5Bank of America's lead depository institution did not opt for SLR relief.
6The company expects no impact on customer service or capital return plans due to SLR expiration.
7SLR has historically not been a constraint for Bank of America.

BANK OF AMERICA CORP /DE/ 8-K Report, Corporate Update (Mar 19, 2021)

Summary

Key Highlights

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