Bank of America 2015 Annual Report Download - page 214

212 Bank of America 2015
The capital adequacy rules issued by the U.S. banking
regulators require institutions to meet the established minimums
outlined in the Regulatory Capital under Basel 3 – Transition table.
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, 2015 and 2014, the Corporation and its banking
entity affiliates were "well capitalized."
Other Regulatory Matters
On February 18, 2014, the Federal Reserve approved a final rule
implementing certain enhanced supervisory and prudential
requirements established under the 2010 Dodd-Frank Wall Street
Reform and Consumer Protection Act. The final rule formalizes risk
management requirements primarily related to governance and
liquidity risk management and reiterates the provisions of
previously issued final rules related to risk-based and leverage
capital and stress test requirements. Also, a debt-to-equity limit
may be enacted for an individual BHC if it is determined to pose
a grave threat to the financial stability of the U.S. Such limit is at
the discretion of the Financial Stability Oversight Council (FSOC)
or the Federal Reserve on behalf of the FSOC.
The Federal Reserve requires the Corporation’s banking
subsidiaries to maintain reserve requirements based on a
percentage of certain deposits. The average daily reserve balance
requirements, in excess of vault cash, maintained by the
Corporation with the Federal Reserve were $9.8 billion and $9.1
billion for 2015 and 2014. At December 31, 2015 and 2014, the
Corporation had cash in the amount of $12.1 billion and $7.7
billion, and securities with a fair value of $17.5 billion and $19.2
billion that were segregated in compliance with securities
regulations or deposited with clearing organizations.
The primary sources of funds for cash distributions by the
Corporation to its shareholders are capital distributions received
from its banking subsidiaries, BANA and Bank of America
California, N.A. In 2015, the Corporation received dividends of
$18.8 billion from BANA and none from Bank of America California,
N.A. The amount of dividends that a subsidiary bank may declare
in a calendar year 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 2016, BANA can
declare and pay dividends of approximately $5.0 billion to the
Corporation plus an additional amount equal to its retained net
profits for 2016 up to the date of any such dividend declaration.
Bank of America California, N.A. can pay dividends of $895 million
in 2016 plus an additional amount equal to its retained net profits
for 2016 up to the date of any such dividend declaration.