Warren Buffet’s Berkshire Hathaway have announced that they are looking to the Federal Reserve to allow the company to increase their stake in Bank Of America to over 10%, a level of ownership that would normally trigger a regulatory review. Based on this announcement, shares in Bank of America rallied reaching close to yearly highs.

Berkshire Hathaway, who in July, announced that the company had hit their ownership threshold, filed a new application with the Federal reserve in which the company made a number of assurances that it plans on passively investing in the bank, according to a copy of the application provided by the regulator. In the filing, which was signed by Warren Buffet himself, the company said that “Berkshire may decide to purchase additional shares of common stock of Bank of America based on its evaluation of the investment opportunity presented by such purchases,”

In the second quarter of 2011, Buffett made a deal with Bank of America, to invest $5 billion USD into the bank for preferred stock and warrants, which assisted in boosting confidence of the lender as the company faced losses due to subprime mortgages. Then in 2017, Berkshire swapped the holding of preferred shares for a common share holding valued at over $16 billion USD. With this move, Bank of America are now ranked as Berkshires second largest equity holding, after Apple Inc.
“We have appreciated Berkshire’s ownership for the past seven-plus years. Through our success, Berkshire and other long-term shareholders have benefited. We look forward to Berkshire’s support as we continue to drive responsible growth at Bank of America.” A spokesperson for Bank of America said. US regulatory bodies usually review relationships between banks and investors, especially in cases where a shareholder can be deemed to have control over the lender.
Berkshire Hathaway currently have over $200 billion in equity investments that the company manages, and this is not the first time that Buffett has gone to the Federal Reserve in a bid to increase ownership thresholds. In 2016 Buffett placed another application with the Fed, in an attempt to purchase over 10% of another bank, Wells Fargo & Co. However Buffett later announced that the company would be cutting back on their stake in Wells Fargo, as the central bank said a larger position would limit Berkshire’s ability to do business with the lender.
-Kim Xing Xiao
-Bennet Global
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