Annual report pursuant to Section 13 and 15(d)

Regulatory Requirements and Restrictions

v3.10.0.1
Regulatory Requirements and Restrictions
 12 Months Ended
Dec. 31, 2018
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, 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. At December 31, 2018, Common equity tier 1 and Tier 1 capital ratios were lower under the Standardized approach whereas the Advanced approaches yielded a lower result for the Total capital ratio. All three ratios were lower under the Advanced approaches method at December 31, 2017.
Effective January 1, 2018, 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 following table presents capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2018 and 2017 for the Corporation and BANA.
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital under Basel 3 (1)
 
 
 
 
 
 
 
 
 
 
 
Bank of America Corporation
 
Bank of America, N.A.

Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (2)
 
Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (3)
(Dollars in millions, except as noted)
December 31, 2018
Risk-based capital metrics:
 

 
 

 
 
 
 

 
 

 
 
Common equity tier 1 capital
$
167,272

 
$
167,272

 
 
 
$
149,824

 
$
149,824

 
 
Tier 1 capital
189,038

 
189,038

 
 
 
149,824

 
149,824

 
 
Total capital (4)
221,304

 
212,878

 
 
 
161,760

 
153,627

 
 
Risk-weighted assets (in billions)
1,437

 
1,409

 
 
 
1,195

 
959

 
 
Common equity tier 1 capital ratio
11.6
%
 
11.9
%
 
8.25
%
 
12.5
%
 
15.6
%
 
6.5
%
Tier 1 capital ratio
13.2

 
13.4

 
9.75

 
12.5

 
15.6

 
8.0

Total capital ratio
15.4

 
15.1

 
11.75

 
13.5

 
16.0

 
10.0

 
 
 
 
 
 
 
 
 
 
 
 
Leverage-based metrics:
 
 
 
 
 
 
 
 
 
 
 
Adjusted quarterly average assets (in billions) (5)
$
2,258

 
$
2,258

 
 
 
$
1,719

 
$
1,719

 
 
Tier 1 leverage ratio
8.4
%
 
8.4
%
 
4.0

 
8.7
%
 
8.7
%
 
5.0

 
 
 
 
 
 
 
 
 
 
 
 
SLR leverage exposure (in billions)
 
 
$
2,791

 
 
 
 
 
$
2,112

 
 
SLR
 
 
6.8
%
 
5.0

 
 
 
7.1
%
 
6.0

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
Risk-based capital metrics:
 

 
 

 
 
 
 

 
 

 
 
Common equity tier 1 capital
$
171,063

 
$
171,063

 
 
 
$
150,552

 
$
150,552

 
 
Tier 1 capital
191,496

 
191,496

 
 
 
150,552

 
150,552

 
 
Total capital (4)
227,427

 
218,529

 
 
 
163,243

 
154,675

 
 
Risk-weighted assets (in billions)
1,434

 
1,449

 
 
 
1,201

 
1,007

 
 
Common equity tier 1 capital ratio
11.9
%
 
11.8
%
 
7.25
%
 
12.5
%
 
14.9
%
 
6.5
%
Tier 1 capital ratio
13.4

 
13.2

 
8.75

 
12.5

 
14.9

 
8.0

Total capital ratio
15.9

 
15.1

 
10.75

 
13.6

 
15.4

 
10.0

 
 
 
 
 
 
 
 
 
 
 
 
Leverage-based metrics:
 
 
 
 
 
 
 
 
 
 
 
Adjusted quarterly average assets (in billions) (5)
$
2,224

 
$
2,224

 
 
 
$
1,672

 
$
1,672

 
 
Tier 1 leverage ratio
8.6
%
 
8.6
%
 
4.0

 
9.0
%
 
9.0
%
 
5.0

(1) 
Regulatory capital metrics at December 31, 2017 reflect Basel 3 transition provisions for regulatory capital adjustments and deductions, which were fully phased-in as of January 1, 2018.
(2) 
The December 31, 2018 and 2017 amounts include a transition capital conservation buffer of 1.875 percent and 1.25 percent and a transition global systemically important bank surcharge of 1.875 percent and 1.5 percent. The countercyclical capital buffer for both periods is zero.
(3) 
Percent required to meet guidelines 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 adjusted average total assets for the three months ended December 31, 2018 and 2017.
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, 2018 and 2017, the Corporation and its banking entity affiliates were “well capitalized.”
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 $11.4 billion and $8.9 billion for 2018 and 2017. At December 31, 2018 and 2017, the Corporation had cash and cash equivalents in the amount of $5.8 billion and $4.1 billion, and securities with a fair value of $16.6 billion and $17.3 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 additional information, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash. In
addition, at December 31, 2018 and 2017, the Corporation had cash deposited with clearing organizations of $8.1 billion and $11.9 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 2018, the Corporation received dividends of $26.1 billion from BANA and $320 million from Bank of America California, N.A. In addition, Bank of America California, N.A. returned capital of $1.4 billion to the Corporation in 2018.
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 2019, BANA can declare and pay dividends of approximately $3.1 billion to the Corporation plus an additional amount equal to its retained net profits for 2019 up to the date of any such dividend declaration. Bank of America California, N.A. can pay dividends of $40 million in 2019 plus an additional amount equal to its retained net profits for 2019 up to the date of any such dividend declaration.