Bank of America Takes $1.6 Billion Charge on Libor Transition - Yahoo Finance

(Bloomberg) -- Bank of America Corp. took a roughly $1.6 billion charge tied to the finance industry’s shift away from the London Interbank Offered Rate benchmark, a cost the company said will eventually be made up as income.

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The net non-cash, pretax charge was booked in the final quarter of 2023, and “presented in revenue through market making and similar activities,” it said in a filing Monday. The bank said it expects the $1.6 billion will be “recognized back” into the company’s interest income in subsequent periods through 2026.

As part of the shift away from Libor, alternatives including the Bloomberg Short-Term Bank Yield Index were created. That index will be permanently shut down on Nov. 15. As a result, the bank determined it was required “to ‘de-designate’ certain interest-rate swaps used in cash flow hedges” as of November of 2023, and “reclassify into earnings any amounts recognized in the accumulated other comprehensive income category of shareholders’ equity that relate to forecasted cash flows that are now no longer expected to occur.”

The charge reduced the company’s common equity tier 1 ratio by eight basis points as of the end of 2023. Bank of America is scheduled to report results for the fourth quarter and for 2023 on Friday.

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