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.
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.
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://fasb.org/us-gaap/role/ref/legacyRef