WASHINGTON (AP) — The Federal Reserve has ordered Bank of America to revise its plans for increasing dividends or buying back stock, saying there are gaps in its risk planning.
The Fed announced the decision Wednesday as part of its "stress tests" -- an annual check-up of the nation's biggest financial institutions. This year, 31 banks were tested to determine if they have large enough capital buffers to keep lending through another financial crisis and severe economic downturn.
The central bank is also barring U.S. divisions of two European banks from paying any dividends, saying their planning for financial risks is inadequate. Those divisions belong to Germany's Deutsche Bank and Spain's Santander.
BofA's planning shortfalls don't undermine its positive stress-test results.
The remaining 28 banks can raise dividends or buy back shares.
Bank of America issued the following statement:
Bank of America today announced that the company's Board of Directors authorized a $4 billion common stock repurchase program.
The Federal Reserve Board (Fed) has informed the company that it completed its 2015
Comprehensive Capital Analysis and Review and it did not object to the company's capital plan
for the period from the second quarter of 2015 through the second quarter of 2016. This plan
includes the $4 billion stock repurchase program and maintaining the common stock dividend at
the current rate of $0.05 per share per quarter. The Fed also asked Bank of America to submit
an additional capital plan by September 30, 2015 addressing certain weaknesses identified in
the company's capital planning process. If Bank of America does not make material progress in
addressing these key weaknesses, the Fed may restrict the company's capital distributions.
"Over the last few years we have simplified the company, sharpened our focus on serving
customers and we are returning capital to our shareholders," said Chief Executive Officer Brian
Moynihan. "We believe that this year's planned repurchase program is the best way to continue
to drive value for our shareholders. We are committed to meeting the requirements in the time
frame the Fed has established."
The timing and exact amount of repurchases will be consistent with the company's capital plan
and will be subject to various factors, including the company's capital position, liquidity, financial
performance and alternative uses of capital, stock trading price, and general market conditions,
and may be suspended at any time. The repurchases may be effected through open market
purchases or privately negotiated transactions, including Rule 10b5-1 plans, over the five
quarters beginning with the second quarter of 2015.