⚠ The Regulator Holds the DialModerate threat

Bank of America (BAC) — threat to the moat

Bank of America now warns that its anti-money-laundering order may bring penalties, just as its capital surcharge rises half a point.

A bank's returns are partly set by its regulators, and Bank of America's regulators are tightening in one place while loosening in another. The Office of the Comptroller of the Currency entered a consent order over the bank's anti-money-laundering and sanctions programmes on 23 December 20241. In its second-quarter 2026 filing the bank added that resolution of the order and other regulatory inquiries "may include the payment of monetary penalties"2, language that did not appear in its annual report.

Regulatory eventsDec 2024OCC BSA/AMLconsent orderOct 2025SCB 2.5%, CET1minimum 10.0%Jul 202610-Q adds monetarypenalties languageJan 2027G-SIB surcharge3.0% to 3.5%Bank of America Forms 10-K FY2025 and 10-Q Q2 2026
Two turns of the dial in two years.

The capital rules move the same way. The bank's G-SIB surcharge will rise by 50 basis points to 3.5% under Method 2 on 1 January 20273, and the annual report warns that increases in the stress capital buffer or surcharge could reduce capital returns to shareholders4. The leverage buffer in the supplementary leverage ratio, by contrast, has been cut from 2.0% to 0.75%5.

The bank has been here before. Its risk factors list prior orders or settlements on the rates paid on uninvested brokerage cash, credit card sales practices and representment fees6.

These are not threats to the deposit franchise. They are costs imposed on it, and they fall on the returns the franchise produces.

The resolution regime adds a quieter risk. The annual report warns that the FDIC's single point of entry strategy may result in the holding company's security holders suffering greater losses7. That is the price of being a bank the regulators have planned to rescue by writing down the parent's investors first.

The capital headroom is the number that turns regulation into dollars. In June 2026 the CET1 ratio was 11.2% against a 10.0% minimum89, headroom of about $21.5 billion10; a penalty or a higher surcharge that cut that toward zero would stop the buybacks first.

The number that tests this threat
Moat Explorer calc
CET1 headroom over the minimum, latest quarter
About $21.5bn (1.2 points, June 2026)

The capital a penalty or a higher surcharge would eat into; headroom near zero would stop capital returns.

How it's calculated: (CET1 ratio 11.2% minus the 10.0% minimum) multiplied by $1,792bn of standardized risk-weighted assets, from the Q2 2026 10-Q and results release.
Source: Moat Explorer calculation from Bank of America filings ↗
References
  1. ReportedThe Office of the Comptroller of the Currency entered a consent order over the bank's anti-money-laundering and sanctions programmes on 23 December 2024.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  2. ReportedIn its second-quarter 2026 filing the bank added that resolution of the order and other regulatory inquiries "may include the payment of monetary penalties", language that did not appear in its annual report.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  3. ReportedThe bank's G-SIB surcharge will rise by 50 basis points to 3.5% under Method 2 on 1 January 2027, and the annual report warns that increases in the stress capital buffer or surcharge could reduce capital returns to shareholders.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  4. ReportedThe bank's G-SIB surcharge will rise by 50 basis points to 3.5% under Method 2 on 1 January 2027, and the annual report warns that increases in the stress capital buffer or surcharge could reduce capital returns to shareholders.
    Bank of America Form 10-K for fiscal 2025 - Item 1A risk factors and competition. — FY2025 · publ. 25 February 2026 · source ↗
  5. ReportedThe leverage buffer in the supplementary leverage ratio, by contrast, has been cut from 2.0% to 0.75%.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  6. ReportedIts risk factors list prior orders or settlements on the rates paid on uninvested brokerage cash, credit card sales practices and representment fees.
    Bank of America Form 10-K for fiscal 2025 - Item 1A risk factors and competition. — FY2025 · publ. 25 February 2026 · source ↗
  7. ReportedThe annual report warns that the FDIC's single point of entry strategy may result in the holding company's security holders suffering greater losses.
    Bank of America Form 10-K for fiscal 2025 - Item 1A risk factors and competition. — FY2025 · publ. 25 February 2026 · source ↗
  8. ReportedIn June 2026 the CET1 ratio was 11.2% against a 10.0% minimum, headroom of about $21.5 billion; a penalty or a higher surcharge that cut that toward zero would stop the buybacks first.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
  9. ReportedIn June 2026 the CET1 ratio was 11.2% against a 10.0% minimum, headroom of about $21.5 billion; a penalty or a higher surcharge that cut that toward zero would stop the buybacks first.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  10. Moat Explorer calcIn June 2026 the CET1 ratio was 11.2% against a 10.0% minimum, headroom of about $21.5 billion; a penalty or a higher surcharge that cut that toward zero would stop the buybacks first.
    Moat Explorer calculation from Bank of America's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2019 7,188 / 1,380,326 = 0.52%; 2021 537 / 1,914,286 = 0.03%; 2022 4,718 / 1,986,158 = 0.24%; 2023 26,163 / 1,887,541 = 1.39%; 2024 38,442 / 1,924,106 = 2.00%; 2025 34,513 / 1,984,182 = 1.74% (1,469,705 + 514,477 = 1,984,182, about $1.98 trillion). Average total deposits 2015 1,155,860; 2021 1,914,286; 2022 1,986,158 (about $1.99 trillion); 2015 to 2025 1,984,182 / 1,155,860 - 1 = 72%. Noninterest-bearing share 744,035 / 1,914,286 = 38.9% (2021); 514,477 / 1,984,182 = 25.9% (2025). Noninterest-bearing decline 751,470 - 514,477 = 236,993 (about $237 billion). JPMorgan comparison: deposit cost gap 1.80% - 1.74% = 0.06 points; 0.0006 x 1,984,182 = about 1,190 (about $1.2 billion). JPMorgan revenue per dollar of average deposits 182,447 / 2,506,565 = 7.3 cents; Bank of America 113,097 / 1,984,182 = 5.7 cents. JPMorgan year-end deposits 2,559,320 / 2,018,729 - 1 = 27%; revenue 182,447 / 113,097 - 1 = 61%; market value 935.79 / 391.80 = 2.4 times. Net income margin JPMorgan 57,048 / 182,447 = 31.3%; Bank of America 30,509 / 113,097 = 27.0%. Efficiency gap 61.65% - 52% = 9.65 points x 113,097 = about 10,914 (about $10.9 billion). Loans to deposits 1,185,700 / 2,018,729 = 58.7%. Uninsured deposits 723.0 + 134.9 = 857.9 billion; 857.9 / 2,018.7 = 42.5%; insured and other 2,018.7 - 857.9 = 1,160.8 billion. Consumer deposits per checking account 957.0 billion / 38.7 million = about $24,700. Securities: held-to-maturity unrealised loss as a share of common equity 108,596 / 244,800 = 44% (2022); 82,094 / 276,100 = 30% (June 2026). Held-to-maturity amortised cost 2021 674,591 - 2025 522,685 = 151,906 (about $152 billion); 2020 438,279 to 2021 674,591 = +236,312 (about $236 billion); 2021 fair value 665,890 - cost 674,591 = -8,701. Runoff time 505,828 / 34,794 = 14.5 years. Agency MBS share of loss 67,309 / 80,257 = 84%. Net interest income H1 31,742 / 29,113 - 1 = 9.0%. Capital: CET1 headroom (11.2% - 10.0%) x 1,792 billion = about 21.5 billion; 2027 minimum 4.5% + 3.5% + 2.5% = 10.5%. Capital returned 2025 (8.1 + 21.433) / 29.055 = 101% of net income to common. Average diluted shares 7,680.9 / 11,236.2 - 1 = -31.6%. EPS growth (3.81 / 1.31)^(1/10) - 1 = 11.3% a year. Price to tangible book 56.03 / 29.37 = 1.91. Revenue 2023 102,769 to 2025 113,097 = +10%. Compensation 42,346 / 69,727 = 61% of noninterest expense. Financial centers 3,530 / 3,664 - 1 = -3.7%. Noninterest expense Q2 2026 18,627 / 17,183 - 1 = 8.4%. Berkshire holding 483,394,015 / 1,032,852,006 - 1 = -53%. Investment banking fees Q2 2025 implied 2.1 / 1.5 = 1.4 billion. Segments (FTE, 2025): segment revenue 43,673 + 24,883 + 24,108 + 24,096 = 116,760; less All Other 3,054 = 113,706; less FTE adjustment 609 = 113,097. Shares of total FTE revenue: Consumer 43,673 / 113,706 = 38.4%; GWIM 24,883 / 113,706 = 21.9%. Shares of net income 30,509: Consumer 12,245 = 40.1%; Global Banking 7,793 = 25.5%; Global Markets 6,111 = 20.0%; GWIM 4,670 = 15.3%. Net income margins: Consumer 12,245 / 43,673 = 28.0%; GWIM 4,670 / 24,883 = 18.8% (2024 4,263 / 22,929 = 18.6%; 2023 3,947 / 21,105 = 18.7%); Global Banking 7,793 / 24,108 = 32.3%; Global Markets 6,111 / 24,096 = 25.4%. Consumer net interest income 35,309 / 43,673 = 81%; Consumer provision 4,649 / 5,675 = 82%. Growth 2023-2025: Consumer 43,673 / 42,031 - 1 = 3.9%; GWIM 24,883 / 21,105 - 1 = 17.9%; Global Markets 24,096 / 19,533 - 1 = 23.4%; Global Banking net income 7,793 / 10,072 - 1 = -23%. Consumer H1 2026 revenue 11,336 + 11,049 = 22,385. GWIM net interest income 7,197 / 24,883 = 29%. Revenue per dollar of year-end assets: Global Markets 24,096 / 1,032,858 = 2.3 cents; Consumer 43,673 / 1,039,346 = 4.2 cents. GWIM client balances 4,751,394 / 4,252,106 - 1 = 11.7%, increase 499,288; net flows 81,997 / 4,252,106 = 1.9%; consumer investment assets 639.5 / 599.1 - 1 = 6.7%. Revenue per dollar of balances: Private Bank 4,167 / 759,082 = 0.55%; Merrill 20,716 / 3,992,312 = 0.52%; Private Bank share of GWIM balances 759,082 / 4,751,394 = 16% and revenue 4,167 / 24,883 = 17%. Investment and brokerage services 19,956 / 17,766 - 1 = 12.3%. Common equity 277,251 / total assets 3,411,738 = 8.1%. AUM net flows 81,997 / 2,177,708 = 3.8%. Held-to-maturity loss 2023 97,994 / 263,249 = 37%. Share price 56.03 / 52-week high 65.23 - 1 = -14%. First half 2026 (Q1 + Q2): Consumer Banking revenue 11,049 + 11,336 = 22,385 and net income 3,060 + 3,281 = 6,341; Global Banking net income 2,087 + 2,046 = 4,133; Global Markets revenue 7,109 + 8,022 = 15,131 - capital, valuation, returns and comparisons with JPMorgan. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Bank of America's Forms 10-K and 10-Q, earnings releases, JPMorgan's 10-K, Berkshire 13F tables and market data; operands shown in the source line.
Sources
Generated September 25, 2026