Bloomberg News

BofA’s Moynihan Says Capital Rules May Discourage Lending

June 17, 2011

(Updates price decline in third paragraph.)

June 17 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Brian T. Moynihan said excessive capital surcharges on the largest banks could limit lending and discourage investors from funding the industry.

“If you impact our returns and our business to a point, investors are going to look around and say there’s other places to put the money,” Moynihan said today in an interview with Bloomberg Television in St. Petersburg, Russia, where the International Economic Forum is being held. “And that’s what you’ve actually seen in bank stocks.”

The KBW Bank Index of 24 U.S. lenders has fallen 9.1 percent this year, led by the 20 percent decline at Bank of America. The Basel Committee on Banking Supervision is considering a capital surcharge of as much as 3.5 percentage points on the largest banks if they get bigger, according to two people familiar with the talks.

Draft plans circulated before a meeting next week would subject banks to a sliding scale depending on their size and links to other lenders, said the people, who declined to be identified because the proposals aren’t public. Charlotte, North Carolina-based Bank of America is the largest U.S. lender.

“We just need to get through it, so the uncertainty is gone and we can figure out the change in business model,” Moynihan said.

Moynihan, 51, has been selling assets including the Balboa insurance unit, First Republic Bank and a stake in BlackRock Inc. to bolster finances and focus on retail customers, commercial borrowers and investment banking. Moynihan said in April that the lender’s dividend may remain 1-cent a share until next year after the Federal Reserve rejected his proposal for an increase.

Building Capital

Moynihan has said the company can build its financial strength through earnings and doesn’t need to issue new stock to generate funds, a point he reiterated today in a CNBC interview.

“We don’t need to raise capital in the sense that we can build the capital over time,” he said in an interview on the business-news station, when asked about regulators demanding greater buffers against losses. “There’s phasing periods for this and we’ve been clear about that with investors.”

Bank of America must boost earnings if it’s to meet capital requirements in the coming decade without raising money from investors, said Paul Miller, a former examiner with the Federal Reserve Bank of Philadelphia and analyst with FBR Capital Markets in Arlington, Virginia. The company posted a $2.2 billion net loss last year on writedowns tied to credit cards and mortgages.

“The problem is we don’t know if they have to raise capital,” Miller said June 13 in an interview on Bloomberg Television. “If losses continue to rise and they don’t earn money, you might see these guys back at the capital markets.”

Bank of America advanced 8 cents to $10.68 at 4 p.m. in New York Stock Exchange composite trading.

--Editors: Dan Kraut, William Ahearn

To contact the reporters on this story: Lindsey Rupp in New York at Lrupp1@bloomberg.net; Brooke Sutherland in New York at Bsutherland5@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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