NEW YORK - Bank of America is suspending a long-awaited dividend increase and stock buyback program after the bank discovered an error in a financial report it gave to the Federal Reserve.
The bank, one of the largest serving the Charleston region, said in statement Monday that the error was related to how it valued securities obtained in its acquisition of Merrill Lynch during the financial crisis in 2009.
As a result, the bank slightly overstated the amount of capital it held and other financial ratios it reported last month as part of its earnings release and its annual financial checkup with the Federal Reserve, the bank's regulator.
Those ratios are a crucial measure of a bank's health and help investors and regulators determine how much of a financial cushion it has to help it survive another financial crisis.
The error didn't affect BofA's earnings, according to the bank's statement.
The news hit the bank's stock. Shares of the company tumbled more than 6 percent Monday, closing down $1 to $14.95.
The Charlotte-based bank, said it has already notified the Federal Reserve about the needed revisions. It was only last month that the Fed cleared BofA's proposal to raise its dividend for the first time since the financial crisis when the bank passed its "stress test," an annual check-up the Fed conducts on the country's biggest financial institutions.
BofA planned to buy $4 billion of its own stock and raise its dividend from a penny per share to 5 cents per share
The decision to scuttle that plan came about at the Fed's request, according to the bank's statement.
Bank of America said it will submit a new application to the Federal Reserve to increase its dividend and buy back its own stock. The bank warned that its plans for returning capital to shareholders will likely be smaller than previously planned.
The Fed oversees banks' plans for managing their capital to make sure they have enough money in reserve to keep loans flowing even in during an economic downturn. The Fed has conducted annual tests of the largest U.S. banks every year since 2009, the year after the financial crisis plunged the country into the worst economic downturn since the Great Depression of the 1930s.