In the latest f%$#-up, Bank of America had to suspend its stock buyback and dividends because the “misfigured” its capital levels:
Bank of America Corp said on Monday that regulators had suspended its plan to buy back more shares and raise its dividend after the bank realized it had miscalculated a measure of the capital on its books.
The second-largest U.S. bank said fixing the mistake reduced a capital level by $4 billion, or about three-quarters of the extra money that the Federal Reserve had approved its returning to shareholders over the next year.
News of the gaffe sent the bank’s shares down 6.3 percent on Monday to close at $14.95, in the biggest one-day decline in the stock since November 2012.
The announcement illustrates how difficult it is to determine appropriate capital levels for the biggest banks, particularly under hypothetical stress situations that regulators consider. Bank of America now has to submit its request to return more capital to shareholders for a third time, and the Fed itself previously erred in projecting the bank’s minimum capital ratios under a stressed scenario.
The previously approved increase in the bank’s dividend would have been the first since the financial crisis, and raising it has been a focus of top executives. Banks historically paid out relatively high dividends, spurring retirees and other investors seeing income to buy their shares.
Banks failed to cut their dividends even as their earnings shrank during the financial crisis, burning up valuable capital and leaving them more vulnerable as the housing market deteriorated. In response, lawmakers have given regulators much more control over banks’ plans to return funds to shareholders.
The Fed said Bank of America has 30 days to submit a new plan that corrects the errors and ensures no further reporting problems if it would like to return more money to shareholders over the next four quarters.
Seriously. Just how f%$#ed up does a bank have to be to have the Federal Reserve, an organization which has not just been captured by the finance industry, but which is in part owned by the by the finance industry, to reverse a decision to increase dividends?
BTW, does anyone actually believe that it “miscalculated” its capital ratio?
My guess is that there were a bunch of stock options vesting, and this accounting “error” facilitated top execs cashed in.
This bank is too corrupt, or too incompetent, to continue to exist in its current form.
Fed press release after the break:
Press Release
Release Date: April 28, 2014
For release at 9:00 a.m. EDT
The Federal Reserve Board on Monday announced it is requiring Bank of America Corporation to resubmit its capital plan and to suspend planned increases in capital distributions. The decision relates to the disclosure by Bank of America that the banking organization incorrectly reported data used in the calculation of regulatory capital ratios and submitted as inputs for the most recent stress tests conducted by the Federal Reserve.
The Federal Reserve can require a banking organization that is part of the annual Comprehensive Capital Analysis and Review (CCAR) program to resubmit its capital plan at any time if there is a material change that could potentially lead to an alteration in a firm’s capital position. Bank of America will be required to resubmit its capital plan within 30 days, unless that time is extended by the Federal Reserve. 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.
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 Federal Reserve in CCAR evaluates the capital planning processes and capital adequacy of the largest bank holding companies, including the firms’ proposed capital actions such as dividend payments and share buybacks and issuances.
For media inquiries, call 202-452-2955
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