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SEC says Bank of America will pay $7.65M to end inquiry into errors in report to Fed

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NEW YORK — The Securities and Exchange Commission says Bank of America will pay $7.65 million to settle allegations that it overstated how much capital it had on its books.

Bank of America Corp. said in April that it had made an error in how it how it valued securities obtained in its acquisition of Merrill Lynch during the financial crisis in 2009.

Banks are required to have capital buffers that are large enough to keep lending through another financial crisis. The Federal Reserve subjects the banks to annual "stress tests" to check on their condition.

The SEC says Bank of America overstated the amount of capital it had on hand, which means the data the Fed used in its testing of the bank was incorrect. The SEC says the size of the overstatement eventually reached the billions of dollars.

After the error was discovered, the second-largest U.S. bank had to submit a new capital plan to the Federal Reserve, delaying a planned stock buyback and an increase to its dividend. The new capital plan was approved in August, and Bank of America canceled the $4 billion stock buyback. It raised its dividend to 5 cents from 1 cent.

Bank of America declined comment on the latest penalty.

In August the Charlotte, North Carolina, company agreed to a record $17 billion settlement with federal and state authorities over its role in the sale of mortgage-backed securities before the 2008 financial crisis. The agreement includes $10 billion in cash and $7 billion in consumer relief.

Shares of Bank of America lost 6 cents to $16.975 in afternoon trading Monday. Its shares had risen more than 9 percent so far this year through Friday's close.

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