Bank of America Recognizes $1.6 Billion Charge on Discontinuation of Loan Index

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 [e-mail]

(END) Dow Jones Newswires

January 08, 2024 10:51 ET (15:51 GMT)

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