Bank of America 2011 Annual Report Download - page 236

234 Bank of America 2011
The table below presents actual and minimum required regulatory capital amounts for 2011 and 2010.
Regulatory Capital
(Dollars in millions)
Risk-based capital
Tier 1 common
Bank of America Corporation
Tier 1
Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.
Total
Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.
Tier 1 leverage
Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.
December 31
2011
Actual
Ratio
9.86%
12.40
11.74
17.63
16.75
15.17
19.01
7.53
8.65
14.22
Amount
$ 126,690
159,232
119,881
24,660
215,101
154,885
26,594
159,232
119,881
24,660
Minimum
Required (1)
n/a
$ 51,379
40,830
5,596
102,757
81,661
11,191
84,557
55,454
6,935
2010
Actual
Ratio
8.60%
11.24
10.78
15.30
15.77
14.26
16.94
7.21
7.83
13.21
Amount
$125,139
163,626
114,345
25,589
229,594
151,255
28,343
163,626
114,345
25,589
Minimum
Required (1)
n/a
$ 58,238
42,416
6,691
116,476
84,831
13,383
90,811
58,391
7,748
(1) Dollar amount required to meet guidelines for adequately capitalized institutions.
n/a = not applicable
Regulatory Capital Developments
The Corporation manages regulatory capital to adhere to regulatory
standards of capital adequacy based on current understanding of
the rules and the application of such rules to the Corporation’s
business as currently conducted. The regulatory capital rules as
written by the Basel Committee on Banking Supervision (the Basel
Committee) continue to evolve.
U.S. banking regulators published a final Basel II rule (Basel
II) in December 2007, which requires the Corporation to implement
Basel II at the holding company level as well as at certain U.S.
bank subsidiaries, establishes requirements for the U.S.
implementation and provides detailed requirements for a new
regulatory capital framework related to credit and operational risk
(Pillar 1), supervisory requirements (Pillar 2) and disclosure
requirements (Pillar 3). The Corporation is currently in the Basel
II parallel period.
On December 15, 2010, U.S. regulators announced a notice
of proposed rulemaking (NPR) on the Risk-based Capital
Guidelines for Market Risk. On December 29, 2011, U.S.
regulators issued an NPR that would amend the December 2010
NPR. This amended NPR is expected to increase the capital
requirements for the Corporation’s trading assets and liabilities.
The Corporation continues to evaluate the capital impact of the
proposed rules and currently anticipates it will be in compliance
with any final rules by the projected implementation date in late
2012.
In addition, the Basel Committee issued capital standards
entitled “Basel III: A global regulatory framework for more resilient
banks and banking systems,” together with liquidity standards
discussed below (Basel III) in December 2010. The Corporation
expects to be in compliance with the Basel III capital standards
within the regulatory timelines. If implemented by U.S. banking
regulators as proposed, Basel III could significantly increase the
Corporation’s capital requirements. Basel III and the Financial
Reform Act propose the disqualification of Trust Securities from
Tier 1 capital, with the Financial Reform Act proposing that the
disqualification be phased in from 2013 to 2015. Basel III also
proposes the deduction of certain assets from capital (deferred
tax assets, MSRs, investments in financial firms and pension
assets, among others, within prescribed limitations), the inclusion
of accumulated OCI in capital, increased capital for counterparty
credit risk, and new minimum capital and buffer requirements. For
additional information on deferred tax assets and MSRs, see Note
21 – Income Taxes and Note 25 – Mortgage Servicing Rights. The
phase-in period for the capital deductions is proposed to occur in
20 percent increments from 2014 through 2018 with full
implementation by December 31, 2018. An increase in capital
requirements for counterparty credit is proposed to be effective
January 2013. The phase-in period for the new minimum capital
requirements and related buffers is proposed to occur between
2013 and 2019. U.S. banking regulators have indicated a goal to
adopt final rules in 2012.
Preparing for the implementation of the new capital rules is a
top strategic priority for the Corporation. The Corporation intends
to continue to build capital through retaining earnings, actively
reducing legacy asset portfolios and implementing other capital
related initiatives, including focusing on reducing both higher risk-
weighted assets and assets currently deducted, or expected to be
deducted under Basel III, from capital.
On June 17, 2011, U.S. banking regulators proposed rules
requiring all large bank holding companies (BHCs) to submit a
comprehensive capital plan to the Federal Reserve as part of an
annual Comprehensive Capital Analysis and Review (CCAR). The
proposed regulations require BHCs to demonstrate adequate
capital to support planned capital actions, such as dividends,
share repurchases or other forms of distributing capital. CCAR
submissions are subject to approval by the Federal Reserve. The
Federal Reserve may require BHCs to provide prior notice under
certain circumstances before making a capital distribution. On
January 5, 2012, the Corporation submitted a capital plan to the
Federal Reserve consistent with the proposed rules.