Banking

Moynihan predicts Bank of America will pass 2 upcoming regulatory tests

Bank of America CEO Brian Moynihan said Thursday he expects the Charlotte-based bank will pass its upcoming stress test and rewrite of its “living will,” two key regulatory tests the company has stumbled on in the past.
Bank of America CEO Brian Moynihan said Thursday he expects the Charlotte-based bank will pass its upcoming stress test and rewrite of its “living will,” two key regulatory tests the company has stumbled on in the past. jsimmons@charlotteobserver.com

Bank of America CEO Brian Moynihan said Thursday he expects the Charlotte-based bank will pass its upcoming stress test and rewrite of its “living will,” two key regulatory tests the company has stumbled on in the past.

“We think we’ll pass them both,” Moynihan said in an interview that aired on CNBC’s “Closing Bell” show. “The question is, it’s just work.”

During the roughly 10-minute segment, Moynihan also touched on North Carolina’s controversial LGBT law, the presidential race, his plans to keep cutting costs at the bank – and whether the company plans to shrink its presence in Charlotte.

House Bill 2

Moynihan reiterated the bank’s calls for North Carolina to repeal House Bill 2, which requires transgender people in public places to use bathrooms that correspond with the sex on their birth certificates. Since Gov. Pat McCrory signed the bill into law in March, Bank of America has been among U.S. companies critical of the legislation.

“Our own employees are worried that a law like this will impact them,” Moynihan said. “Even if it may not affect them personally, in a sense of who they are, what they do, it affects their teammates.”

“Our view is that it ought to be pulled back,” he said, “because it represents something that’s against the values of our company.”

The presidential race

Moynihan was asked by interviewer Wilfred Frost his thoughts on what it would mean for banks if Republican Donald Trump or Democrats Hillary Clinton and Bernie Sanders won the presidential election.

The CEO declined to comment specifically on the candidates.

“The reality is we need a president and we need a country that’s focused on growing and focused on investing to grow,” Moynihan said.

Cutting costs

Since taking over as CEO in 2010, Moynihan has cut billions of dollars of costs from the bank, in part by eliminating jobs and divesting some businesses.

Frost asked if more cost-cutting is in store, as the bank remains under pressure from investors to improve its efficiency ratio, which measures expenses as a percentage of revenue.

“Oh, absolutely,” Moynihan said. “And we’ve done it every quarter for 20-odd quarters in a row. So this is not new news.”

Even as the bank reduces expenses, it is investing in other areas, such as the $3 billion a year it spends on technology, Moynihan said.

Charlotte commitment

Frost asked whether Moynihan would consider eliminating one of Bank of America’s hubs in Charlotte, Boston and New York to help it further cut costs.

“We have one headquarters,” Moynihan said, referring to Charlotte, where the bank employs about 15,000.

Moynihan noted the bank has been able to slash costs by shrinking its real estate footprint in certain markets.

“We’ve taken, I think, 6 to 8 million square feet out in New York City alone,” he said. “We’ve taken 40 million square feet out in the company over the last seven years.”

Stress tests and living wills

The largest U.S. banks are expected to learn from the Federal Reserve by the end of June whether they have passed their latest stress tests, annual exams meant to determine how the firms would fare in a hypothetical downturn.

Bank of America has had miscues on the exams in three of the past five years. Responsibility for the bank’s submission this year falls to Charlotte-based Andrea Smith, whom Moynihan named chief administrative officer last summer.

Separately, Bank of America and four other large banks, including Wells Fargo, were told last month by the Federal Reserve and the Federal Deposit Insurance Corp. to fix problems in their living wills, which the regulators deemed were not credible. The wills show how big U.S. banks would be dismantled in a failure without relying on taxpayer bailouts. The banks have until Oct. 1 to fix the problems with their wills.

Smith is also overseeing the bank’s resubmission of its living will since taking over the process late last year.

Moynihan made it clear the bank is heavily focused on addressing the deficiencies in its will, noting the bank has spent about $1 billion on the process.

“We got some tasks to work,” he said. “It’s in our best interests to make it work. We take it very seriously.”

“I think we've got the plan in place to make it work.”

Deon Roberts: 704-358-5248, @DeonERoberts

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