Annual report pursuant to Section 13 and 15(d)

Regulatory Requirements and Restrictions

v3.6.0.2
Regulatory Requirements and Restrictions
 12 Months Ended
Dec. 31, 2016
Banking and Thrift [Abstract]  
Regulatory Requirements and Restrictions
Regulatory Requirements and Restrictions
The Federal Reserve, Office of the Comptroller of the Currency (OCC) and FDIC (collectively, U.S. banking regulators) jointly establish regulatory capital adequacy guidelines 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.
Basel 3 updated the composition of capital and established a Common equity tier 1 capital ratio. Common equity tier 1 capital primarily includes common stock, retained earnings and accumulated OCI. Basel 3 revised minimum capital ratios and buffer requirements, added a supplementary leverage ratio, and addressed the adequately capitalized minimum requirements under the Prompt Corrective Action (PCA) framework. Finally, Basel 3 established two methods of calculating risk-weighted assets, the Standardized approach and the Advanced approaches.
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 PCA framework.
The table below presents capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches – Transition as measured at December 31, 2016 and 2015 for the Corporation and BANA.
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital under Basel 3 – Transition (1)
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
Bank of America Corporation
 
Bank of America, N.A.
(Dollars in millions)
Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (2, 3)
 
Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (4)
Risk-based capital metrics:
 

 
 

 
 
 
 

 
 

 
 
Common equity tier 1 capital
$
168,866

 
$
168,866

 
 
 
$
149,755

 
$
149,755

 
 
Tier 1 capital
190,315

 
190,315

 
 
 
149,755

 
149,755

 
 
Total capital (5)
228,187

 
218,981

 
 
 
163,471

 
154,697

 
 
Risk-weighted assets (in billions)
1,399

 
1,530

 
 
 
1,176

 
1,045

 
 
Common equity tier 1 capital ratio
12.1
%
 
11.0
%
 
5.875
%
 
12.7
%
 
14.3
%
 
6.5
%
Tier 1 capital ratio
13.6

 
12.4

 
7.375

 
12.7

 
14.3

 
8.0

Total capital ratio
16.3

 
14.3

 
9.375

 
13.9

 
14.8

 
10.0

 
 
 
 
 
 
 
 
 
 
 
 
Leverage-based metrics:
 
 
 
 
 
 
 
 
 
 
 
Adjusted quarterly average assets (in billions) (6)
$
2,131

 
$
2,131

 
 
 
$
1,611

 
$
1,611

 
 
Tier 1 leverage ratio
8.9
%
 
8.9
%
 
4.0

 
9.3
%
 
9.3
%
 
5.0

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
Risk-based capital metrics:
 

 
 

 
 
 
 

 
 

 
 
Common equity tier 1 capital
$
163,026

 
$
163,026

 
 
 
$
144,869

 
$
144,869

 
 
Tier 1 capital
180,778

 
180,778

 
 
 
144,869

 
144,869

 
 
Total capital (5)
220,676

 
210,912

 
 
 
159,871

 
150,624

 
 
Risk-weighted assets (in billions)
1,403

 
1,602

 
 
 
1,183

 
1,104

 
 
Common equity tier 1 capital ratio
11.6
%
 
10.2
%
 
4.5
%
 
12.2
%
 
13.1
%
 
6.5
%
Tier 1 capital ratio
12.9

 
11.3

 
6.0

 
12.2

 
13.1

 
8.0

Total capital ratio
15.7

 
13.2

 
8.0

 
13.5

 
13.6

 
10.0

 
 
 
 
 
 
 
 
 
 
 
 
Leverage-based metrics:
 
 
 
 
 
 
 
 
 
 
 
Adjusted quarterly average assets (in billions) (6)
$
2,103

 
$
2,103

 
 
 
$
1,575

 
$
1,575

 
 
Tier 1 leverage ratio
8.6
%
 
8.6
%
 
4.0

 
9.2
%
 
9.2
%
 
5.0

(1) 
As Advanced approaches institutions, the Corporation and its banking entity affiliates are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015.
(2) 
The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition global systemically important bank (G-SIB) surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.
(3) 
To be “well capitalized” under the current U.S. banking regulatory agency definitions, a BHC must maintain a Total capital ratio of 10 percent or greater.
(4) 
Percent required to meet guidelines to be considered "well capitalized" under the PCA framework.
(5) 
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.
(6) 
Reflects adjusted average total assets for the three months ended December 31, 2016 and 2015.
The capital adequacy rules issued by the U.S. banking regulators require institutions to meet the established minimums outlined in the Regulatory Capital under Basel 3 – Transition table. 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, 2016 and 2015, the Corporation and its banking entity affiliates were “well capitalized.”
Other Regulatory Matters
The Federal Reserve requires the Corporation’s banking 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 were $7.7 billion and $9.8 billion for 2016 and 2015. At December 31, 2016 and 2015, the Corporation had cash and cash equivalents in the amount of $4.8 billion and $5.1 billion, and securities with a fair value of $14.6 billion and $16.4 billion that were segregated in compliance with securities regulations. In addition, at December 31, 2016 and 2015, the Corporation had cash deposited with clearing organizations of $10.2 billion and $9.7 billion primarily in other assets.
The primary sources of funds for cash distributions by the Corporation to its shareholders are capital distributions received from its banking subsidiaries, BANA and Bank of America California, N.A. In 2016, the Corporation received dividends of $13.4 billion from BANA and $150 million from Bank of America California, N.A. The amount of dividends that a subsidiary bank may declare in a calendar year 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 2017, BANA can declare and pay dividends of approximately $6.2 billion to the Corporation plus an additional amount equal to its retained net profits for 2017 up to the date of any such dividend declaration. Bank of America California, N.A. can pay dividends of $546 million in 2017 plus an additional amount equal to its retained net profits for 2017 up to the date of any such dividend declaration.