Part 4/8:
Liquidity Coverage Ratio
First, the newly implemented liquidity coverage ratio (LCR) requires banks to hold a higher percentage of liquid assets to ensure they can withstand sudden cash outflows. This change adversely affected Bank of America, as the bank's broader scope—encompassing both investment banking and regional operations—necessitated that it maintain a more liquid balance sheet compared to its peers like Wells Fargo. Despite holding $1.8 trillion in earning assets, only 41% of these were allocated to loans, which limited its profit-generating capacity.
Maxfield highlighted that this legal structure forced Bank of America to generate less income compared to competitors that maintained a higher ratio of loans in their earning assets.