Here’s Why BofA Is Shedding Weight in China
The cleanup of Bank of America’s (NYSE:BAC) balance sheet continues. Following the disaster that swept through the financial sector after the housing bubble burst five years ago, regulators in the United States and Europe have demanded that banks comply with a new system, named Basel III after the Swiss city where the accord was inked in 2010.
The terms of the agreement subjects global banks to higher capital requirements, aimed at making the institutions better able to absorb losses in the future. The target was a 9.5 percent ratio of equity to risk-weighted assets. But that particular ratio scheme produced huge inconsistencies in which assets were termed “risk weights,” and so the leverage ratio was implement.
With the Basel III deadline in 2019, and the independent goals of Bank of America’s Chief Executive Brian Moynihan, the institution has worked to shore up its capital ratios by selling non-core investments. Since 2011, the bank has shed approximately $60 billion from its balance sheet.