Bank of America’s Stress Test History

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The yearly stress tests have become an important event in the annual banking cycle. Since the current version of the tests were inaugurated in 2011, this has been particularly true for Bank of America (BAC 1.45%).

The Federal Reserve uses the tests to determine whether the nation's biggest banks -- those with more than $50 billion worth of assets on their balance sheets -- have enough capital to survive a hypothetical downturn akin to the financial crisis. Banks that do are in the clear. But banks that don't have to go back to the drawing board to figure out why not.

Even more importantly from the perspective of an investor, the stress tests are when the Fed exercises its veto power over big bank capital plans. In the second stage of the tests, known as the Comprehensive Capital Analysis and Review, or CCAR, the Fed either approves or denies banks' requests to increase their quarterly dividends or to buy back more shares of common stock.

Given that I follow and write about Bank of America so frequently, as each test approaches I find myself wracking my brain over how the North Carolina-based bank performed in past tests -- for the record, I'm talking specifically about the CCAR process, which incorporates the results from the first round of each year's test.

It's not that I forget how Bank of America has generally performed in the past, but I never remember precisely which years it sailed through the test, which year it failed, and which years it ran into problems on the test but nevertheless passed. With this in mind, I decided to commit it to writing. And instead of just keeping it to myself, I figured there may be others out there who feel the same way as I do.

This table offers a brief accounting of Bank of America's stress test history dating back to 2011:

Data sources: Federal Reserve, Bank of America, and Reuters.

Truth be told, all this could soon be irrelevant if the incoming presidential administration follows through on its promise to "dismantle" the 2010 Dodd-Frank Act, the source of the Fed's stress testing authority.

In the event that it's not, however, or if the stress tests are merely altered as opposed to eliminated, then it may still come in handy in the future for analysts, commentators, and investors to have a cheat sheet that covers Bank of America's stress test history.