Fed approves new Bank of America capital plan; sees progress in fixing plan weaknesses

WASHINGTON – The Federal Reserve has approved Bank of America Corp.’s revised plan for building a sturdy capital base, saying the bank has made progress in filling gaps in its plan.

The Fed announced Thursday that it wasn’t objecting to the new plan filed by the second-largest U.S. bank.

Bank of America passed its annual stress test in March. But the Fed gave the bank only conditional approval to raise dividends and buy back shares, because of what the regulators saw as weaknesses in its capital plan dealing with risks and possible losses. At the same time, the bank was allowed to increase dividends and repurchase shares.

But it had to submit a new plan showing how it is building a strong financial foundation to withstand a major economic downturn. And the plan had to pass muster with the Fed, or it could have put a stop to the bank’s share buybacks and dividend increases.

The Fed said Thursday that Bank of America “must continue to make steady, demonstrable progress” in its capital planning and reducing risks.

The bank, based in Charlotte, North Carolina, noted the Fed’s approval in a news release Thursday but didn’t comment on it.

In its latest annual check-up of the nation’s biggest financial institutions, the Fed this year tested 31 banks to determine if they have large enough capital buffers to keep lending through another financial crisis and severe economic downturn. All but two — both U.S. divisions of European banks — passed the stress tests.