Bank of America Sees $1.6B Charge In Q4 On Bloomberg Benchmark Phase-Out

Zinger Key Points
  • Bloomberg Index Services Limited announced that the permanent cessation of BSBY, effective on November 15, 2024.
  • The bank says one-time charge reduces CET1 ratio by 8 basis points; phased recognition through 2026.

Bank of America Corp BAC expects to incur a net non-cash, pretax charge of about $1.6 billion in Q4 FY23 related to phasing out the use of a Bloomberg interest rate benchmark.

However, the bank expects the amount to be recognized back into its interest income in subsequent periods, mostly through 2026.

BAC said that the impact of such accounting treatment is due to the expectation that interest payments on the Bloomberg Short-Term Bank Yield Index (BSBY)-indexed loans will change to Secured Overnight Financing Rate (SOFR), which is projected to have a nominal impact to the economics of these loans. 

As of December 31, 2023, the one-time charge lowered BAC's common equity tier 1 (CET1) ratio by eight basis points.

Notably, on November 15, 2023, the Bloomberg Index Services Limited disclosed the permanent cessation of BSBY and all its tenors, effective November 15, 2024. 

BAC expects to report Q4 FY23 results on January 12, 2024.

Also Read: US Banking Giants Brace For Fourth-Quarter Earnings Amid Mounting Bad Debts, Interest Rate Pressure

Price Action: BAC shares are trading lower by 0.50% at $33.99 premarket on the last check Tuesday.

Photo via Company

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