Sept 16 (Reuters) - Bank of America Corp said its mid-cycle stress test showed that the bank had enough capital to withstand a severe economic downturn.
The second-largest U.S. bank estimated its Tier 1 common capital ratio would hit a low of 8.4 percent under the hypothetical ‘severely adverse scenario’.
“The estimated lowest stress ratios for Tier 1 capital, total capital and Tier 1 leverage were 9.7 percent, 12.8 percent and 6.3 percent,” BofA said in the mid-cycle stress test results released on Monday. ()
These ratios would exceed the minimum comparable regulatory requirements in the stress scenario, which is characterized by real GDP falling 4 percent over six quarters and the unemployment rate rising to 11.7 percent.
The bank projected $26.1 billion in cumulative pre-tax loss over the specified nine-quarter horizon under the hypothetical stress scenario.
The Fed’s annual stress tests were mandated by the 2010 Dodd-Frank financial reform law, and are partly meant to determine whether banks can start returning money to shareholders in the form of dividends or share buybacks.
Bank of America shares were marginally up at $14.58 in late afternoon trading on the New York Stock Exchange.