Bank of America Recognizes $1.6 Billion Charge on Discontinuation of Loan Index
January 08 2024 - 10:06AM
Dow Jones News
By Ben Glickman
Bank of America will recognize a $1.6 billion charge in the
fourth quarter related to the transition away from the London
Interbank Offered Rate benchmark.
The company said the charge was related to the discontinuation
of an alternative reference rate, the Bloomberg Short-Term Bank
Yield Index.
The bank said in a regulatory filing Monday that it had to
"de-designate" some interest-rate swaps used in cash flow hedges of
certain BSBY indexed loans.
The non-cash, pretax charge will be presented in revenue through
market making and similar activities, Bank of America said.
The company expects the net impact of the charge will be
recognized back in interest income, in various periods until
2026.
The charge lowered Bank of America's common equity tier 1 ratio
by eight basis points, as of Dec. 31.
Bank of America said the accounting change was due to "the
expectation that interest payments on the BSBY-indexed loans will
change to SOFR," or Secured Overnight Financing Rate, another
alternative reference rate to LIBOR. This will have a "nominal
impact" on the economics of the loans.
Write to Ben Glickman at ben.glickman@wsj.com
(END) Dow Jones Newswires
January 08, 2024 10:51 ET (15:51 GMT)
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