Bank of America Corp., the second-largest U.S. bank, estimated that its ratio of capital to total assets was between 4.9 percent and 5 percent in the second quarter, near the proposed minimum.
The bank disclosed the so-called supplementary leverage ratio with its second-quarter earnings today. The Charlotte, North Carolina-based bank didn’t estimate the ratio for its federally insured deposit-taking subsidiary.
Under the U.S. plan introduced last week, the parent companies of eight of the largest banks, including Bank of America, would need capital equal to 5 percent of assets and their bank subsidiaries would require 6 percent.
The U.S. proposal surpasses the 3 percent global minimum that the Basel Committee on Banking Supervision approved to help prevent another financial crisis. The changes would force lenders to fund more assets with capital that can absorb losses instead of with borrowed money.
The higher threshold could complicate efforts by Chief Executive Officer Brian T. Moynihan to increase dividends. Lenders that don’t reach the minimum in time could face curbs on bonuses, stock buybacks and payouts to shareholders. While banks would have until the end of 2017 to comply, some may have to retain earnings to meet the goals.
Bank of America slashed its quarterly dividend to a token 1 cent to conserve capital in 2009 after taking a $45 billion U.S. bailout. The funds were repaid later that year and Moynihan, 53, vowed to rebuild capital, only to see regulators block his request for a higher dividend in March 2011. The bank did get Federal Reserve approval in March to buy back as much as $5 billion of stock.
Citigroup Inc., the third-biggest U.S. bank, said its ratio averaged 4.9 percent in the second quarter and in June exceeded the 5 percent minimum that U.S. regulators proposed last week. The New York-based company hasn’t calculated a ratio for its deposit-taking unit, CFO John Gerspach said July 15. He said the ratio was about 6 percent in March.
Wells Fargo & Co. (WFC), the largest home lender, exceeds both minimums, CEO John Stumpf said last week. Goldman Sachs Group Inc. said it’s “very comfortable” with its ability to meet the new U.S. minimum, without giving the current level.
JPMorgan Chase & Co. (JPM), the biggest U.S. bank, said last week that both its holding company, which had a 4.7 percent ratio, and deposit-taking subsidiary fall short of the proposed minimums. CEO Jamie Dimon criticized the plan for going further than international requirements.
“If one is 3 percent and one is 6 percent, that becomes just too big, and over time it can have huge competitive effects,” Dimon said on a July 12 conference call. “We always ran with higher capital and liquidity than most of our competitors.”