NEW YORK — The Federal Reserve rejected a plan by Bank of America Corp. to “modestly” increase its dividend this year, a potential setback for the nation’s biggest bank in its attempt to regain its footing.
Bank of America disclosed the Fed’s response in a regulatory filing today, noting the Fed had “objected to the proposed increase in capital distributions for the second half of 2011.”
The bank’s plan had been submitted in the latest round of Fed stress tests for the nation’s 19 largest bank holding companies, results of which were released Friday.
Bank of America can still reach its stated goal of the modest increase in its penny-a-quarter dividend in the second half of the year, and it intends to resubmit a comprehensive plan in the summer. The bank didn’t request a second-quarter dividend boost, the time period that other banks that were approved had sought.
But after the nation’s three next largest banks were all approved to raise dividends — including Citigroup Inc. which wasn’t expected to raise a dividend until 2012 — after the stress tests, the rejection raises questions for Bank of America.
The bank didn’t give a reason for the rejection, and all the banks had been told by the Fed not to disclose any details about the stress tests.
