Annual report pursuant to Section 13 and 15(d)

Regulatory Requirements and Restrictions

v3.19.3.a.u2
Regulatory Requirements and Restrictions
 12 Months Ended
Dec. 31, 2019
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, 2019 and 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.
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, 2019 and 2018 for the Corporation and BANA.
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital under Basel 3 
 
 
 
 
 
 
 
 
 
 
 
Bank of America Corporation
 
Bank of America, N.A.

Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (1)
 
Standardized Approach
 
Advanced Approaches
 
Regulatory Minimum (2)
(Dollars in millions, except as noted)
December 31, 2019
Risk-based capital metrics:
 

 
 

 
 
 
 
 
 
 
 
Common equity tier 1 capital
$
166,760

 
$
166,760

 
 
 
$
154,626

 
$
154,626

 
 
Tier 1 capital
188,492

 
188,492

 
 
 
154,626

 
154,626

 
 
Total capital (3)
221,230

 
213,098

 
 
 
166,567

 
158,665

 
 
Risk-weighted assets (in billions)
1,493

 
1,447

 
 
 
1,241

 
991

 
 
Common equity tier 1 capital ratio
11.2
%
 
11.5
%
 
9.5
%
 
12.5
%
 
15.6
%
 
7.0
%
Tier 1 capital ratio
12.6

 
13.0

 
11.0

 
12.5

 
15.6

 
8.5

Total capital ratio
14.8

 
14.7

 
13.0

 
13.4

 
16.0

 
10.5

 
 
 
 
 
 
 
 
 
 
 
 
Leverage-based metrics:
 
 
 
 
 
 
 
 
 
 
 
Adjusted quarterly average assets (in billions) (4)
$
2,374

 
$
2,374

 
 
 
$
1,780

 
$
1,780

 
 
Tier 1 leverage ratio
7.9
%
 
7.9
%
 
4.0

 
8.7
%
 
8.7
%
 
5.0

 
 
 
 
 
 
 
 
 
 
 
 
SLR leverage exposure (in billions)
 
 
$
2,946

 
 
 
 
 
$
2,177

 
 
SLR
 
 
6.4
%
 
5.0

 
 
 
7.1
%
 
6.0

 
 
 
 
 
 
 
 
 
 
 
 
 
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 (3)
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) (4)
$
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

(1) 
The capital conservation buffer and global systemically important bank surcharge were 2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods was zero. The SLR minimum includes a leverage buffer of 2.0 percent.
(2) 
Risk-based capital regulatory minimums at December 31, 2019 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 and risk-based capital ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.
(3) 
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.
(4) 
Reflects total average assets adjusted for certain Tier 1 capital deductions.
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, 2019 and 2018, 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 $14.6 billion and $11.4 billion for 2019 and 2018. At December 31, 2019 and 2018, the Corporation had cash and cash equivalents in the amount of $6.3 billion and $5.8 billion, and securities with a fair value of $14.7 billion and $16.6 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 11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash. In
addition, at December 31, 2019 and 2018, the Corporation had cash deposited with clearing organizations of $7.6 billion and $8.1 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 2019, the Corporation received dividends of $20.5 billion from BANA and $215 million from Bank of America California, N.A. In addition, BANA returned capital of $8.0 billion to the Corporation in 2019.
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 2020, BANA can declare and pay dividends of approximately $9.4 billion to the Corporation plus an additional amount equal to its retained net profits for 2020 up to the date of any such dividend declaration. Bank of America California, N.A. can pay dividends of $94 million in 2020 plus an additional amount equal to its retained net profits for 2020 up to the date of any such dividend declaration.