Econintersect: Bank of America has lost some money it thought it had in the form of “certain structured notes assumed in the Merrill Lynch & Co., Inc. acquisition in 2009“. So it seems they never really had the money at all, just an accounting for value that was incorrect. The amount of the miscalculation is not reported* in the press release from B of A, but they describe the effect on previously provided capital ratios. These have been reduced by 5, 12, 21 and 21 basis points for four specified capital ratios.
The reductions seem small. For example, the total capital ratio was reduced from 15% to 14.8% and the estimated Basel 3 Standardized transition common equity tier 1 ratio was reduced from 11.85% to 11.80%. These changes are quite significant, however, and caused the company to suspend announced stock buybacks and dividend increases. They will be resubmitting their 2014 stress test capital plan, as well.
Click on page image below to read entire Bank of America press release:
*It is $4 billion according to Peter Eaves and Michael Corkery (The New York Times): Bank of America Finds a Mistake: $4 Billion Less Capital