Bank of America is considering issuing up to 400 million new common shares as part of an exchange for preferred stock, a move the bank says is a way to reduce dividend expenditures while increasing capital on favorable terms.

The bank says the plan is not stemming from a need to raise more capital to meet regulatory standards, as some investors have feared. The bank has stated several times it would not be forced to issue shares to raise capital.

"We continue to believe that we have enough capital. That's not at issue here," spokesman Jerry Dubrowski said. "What this is about is being able to accelerate the balance sheet strengthening and increase our capital on terms that are advantageous to us."

The plan was announced as part of a Securities and Exchange Commission filing Thursday afternoon.

Market volatility has helped drive down the market value of Bank of America's preferred shares, making it cheaper for the bank to retire them and replace them with common stock and senior debt with a smaller interest rate.

The move would allow the bank to increase its Tier 1 common capital while reducing interest expense, the filing states. The bank would also record a profit by buying back the preferred shares at a discount.

The deal is not assured. Dubrowski said the decision would be made based on demand.

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