NEW YORK (AP) â€” Bank of America is shelving plans to increase its dividend and buy back more stock.
Bank of America Corp. says the move is tied to an incorrect adjustment of how it valued certain securities it obtained through its acquisition of Merrill Lynch in 2009. As a result, it needs higher levels of regulatory capital.
Bank of America’s stock slumped 81 cents, or 5.1 percent, to $15.14 shortly after the start of trading Monday.
The bank, based in Charlotte, N.C., said Monday that, at the request of the Federal Reserve, it will suspend its previously announced plan to buy $4 billion in stock and raise its dividend from a penny per share to 5 cents per share.
The bank said it will resubmit a new capital plan to the Federal Reserve using new numbers for the regulator’s approval. But the amount it will use to increase dividends and buy back stock will likely be smaller than previously planned, according to the bank’s statement.
The Fed oversees banks’ capital plans to make sure that banks can keep loans flowing even in the face of a severe downturn.