Regulatory Requirements and Restrictions
|12 Months Ended|
Dec. 31, 2021
|Banking and Thrift, Interest [Abstract]|
|Regulatory Requirements and Restrictions||
Regulatory Requirements and RestrictionsThe Federal Reserve, Office of the Comptroller of the Currency (OCC) and FDIC (collectively, U.S. banking regulators) jointly establish regulatory capital adequacy rules, including Basel 3, for U.S. banking organizations. As a financial holding company, the Corporation is subject to capital adequacy rules issued by the Federal Reserve. The Corporation’s banking entity affiliates are subject to capital adequacy rules issued by the OCC.
The Corporation and its primary banking entity affiliate, BANA, are Advanced approaches institutions under Basel 3. As Advanced approaches institutions, the Corporation and its banking entity affiliates are required to report regulatory risk-based capital ratios and risk-weighted assets under both the Standardized and Advanced approaches. The approach that yields the lower ratio is used to assess capital adequacy, including under the Prompt Corrective Action (PCA) framework.
The Corporation is required to maintain a minimum supplementary leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments. The Corporation’s insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework.
The table below presents capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2021 and 2020 for the Corporation and BANA.
(1)As of December 31, 2021 and 2020, capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard.
(2)The capital conservation buffer and global systemically important bank (G-SIB) surcharge were 2.5 percent at both December 31, 2021 and 2020. At December 31, 2021 and 2020 the Corporation's stress capital buffer of 2.5 percent was applied in place of the capital conservation buffer under the Standardized approach. The countercyclical capital buffer for both periods was zero. The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent, the Corporation’s G-SIB surcharge of 2.5 percent and the Corporation’s SCB or the capital conservation buffer, as applicable, of 2.5 percent. The SLR regulatory minimum includes a leverage buffer of 2.0 percent.
(3)Risk-based capital regulatory minimums at December 31, 2021 and 2020 are the minimum ratios under Basel 3, including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends are the percent required to be considered well capitalized under the PCA framework.
(4)Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(5)Reflects total average assets adjusted for certain Tier 1 capital deductions.
(6)Supplementary leverage exposure for the Corporation at December 31, 2020 reflects the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The temporary relief expired after March 31, 2021 and is not reflected in supplementary leverage exposure at December 31, 2021.
The capital adequacy rules issued by the U.S. banking regulators require institutions to meet the established minimums outlined in the table above. Failure to meet the minimum requirements can lead to certain mandatory and discretionary actions by regulators that could have a material adverse impact on the Corporation’s financial position. At December 31, 2021 and 2020, the Corporation and its banking entity affiliates were well capitalized.
Due to uncertainty from the pandemic, the Federal Reserve imposed various restrictions on share repurchase programs and dividends during 2020 and the first half of 2021. In conjunction with its release of 2021 CCAR supervisory stress test results, the Federal Reserve announced those restrictions would end as of July 1, 2021 for large banks, including the Corporation, and large banks would be subject to the normal restrictions under the Federal Reserve’s SCB framework. For more information, see Note 13 – Shareholders’ Equity.
Other Regulatory Matters
The Federal Reserve requires the Corporation’s bank subsidiaries to maintain reserve requirements based on a percentage of certain deposit liabilities. The average daily reserve balance requirements, in excess of vault cash, maintained by the Corporation with the Federal Reserve Bank were $0 for 2021 and $3.8 billion for 2020. At December 31, 2021 and 2020, the Corporation had cash and cash equivalents in the amount of $4.0 billion and $4.9 billion, and securities with a fair value of $10.6 billion and $16.8 billion that were segregated in compliance with securities regulations. Cash held on deposit with the Federal Reserve Bank to meet reserve requirements and cash and cash equivalents segregated in compliance with securities regulations are components of restricted cash. For more information, see Note 10 – Securities Financing Agreements, Short-term Borrowings and Restricted Cash. In addition, at December 31, 2021 and 2020, the Corporation had cash deposited with clearing organizations of $28.6 billion and $10.9 billion primarily recorded in other assets on the Consolidated Balance Sheet.
Bank Subsidiary Distributions
The primary sources of funds for cash distributions by the Corporation to its shareholders are capital distributions received from its bank subsidiaries, BANA and Bank of America California, N.A. In 2021, the Corporation received dividends of $15.6 billion from BANA and $29 million from Bank of America California, N.A.
The amount of dividends that a subsidiary bank may declare in a calendar year without OCC approval is the subsidiary bank’s net profits for that year combined with its retained net profits for the preceding two years. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. In 2022, BANA can declare and pay dividends of approximately $14.7 billion to the Corporation plus an additional amount equal to its retained net profits for 2022 up to the date of any such dividend declaration. Bank of America California, N.A. can pay dividends of $234 million in 2022 plus an additional amount equal to its retained net profits for 2022 up to the date of any such dividend declaration.
The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef