Bank of America's discovery that it submitted incorrect information to the Federal Reserve Board during its recent stress test could undermine what has already become an overly complex exercise.

Observers expressed alarm over Monday's announcement, suggesting the mistake raises doubts about the credibility of the Fed's annual exercise, which is intended to show the resiliency of the country's top banks in times of crisis.

"It certainly doesn't give one a lot of confidence in the stress test themselves," said Cornelius Hurley, the director of Boston University's Center for Finance, Law and Policy.

Bank of America alerted the Fed to the error in the reported data, which prompted a downward revision in the bank's previously disclosed capital ratios in the central bank's March test.

The Charlotte-based bank announced in a press release it had provided incorrect information tied to the treatment of certain structured notes it assumed as part of its acquisition of Merrill Lynch & Co. in 2009.

The bank estimates it is still above the regulatory capital minimums of the Comprehensive Capital Analysis and Review even with the downward revisions. But it will be up to the Fed to determine how well the bank does in its do-over.

Regulators have the authority to ask Bank of America to resubmit its capital plan based on disclosed adjustments and to ask the firm to suspend its planned capital distribution increases until its new plan is approved.

"Bank of America must address the quantitative errors in its regulatory capital calculations as part of the resubmission and must undertake a review of its regulatory capital reporting to help ensure there are no further errors," the Fed said.

The firm run by President and CEO Brian Moynihan had planned a $4 billion common stuck repurchase and to increase its quarterly dividend to 5 cents per share. The financial institution has 30 days to comply with the Fed's request.

In afternoon trading, shares of the country's second-largest bank by assets fell 4.8% to $15.19 on Monday.

The latest snafu points to the complexity of the central bank's effort for both the agency and the banks themselves that must surpass the Fed's expectations — a bar that has sometimes perplexed institutions.

"The fact is that big holding companies are very complex and, thus, so is CCAR," said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc. "CCAR has been critical to the credibility of both big holding companies and the Fed, so it's important to balance this complexity with a transparent testing protocol that in future prevents this type of post hoc correction."

Citigroup, which was one of the five firms to fail last month's stress test, for example, expressed surprise when it didn't pass last month.

"This is the course that Dodd-Frank put us on fighting complexity with complexity. It's not a good path to be on," said Hurley.

The Fed has placed a tremendous emphasis on the reputation of the stress tests, which date back to 2009, to give the market assurance that the biggest, most systemic banks would be safe and sound in the event of an economic episode.

Still, some observers expressed a less dire view, arguing that miscalculations can happen, but what's more important is that a system is put in place to address such mistakes. "We do not see this as a long-term threat to Bank of America and believe the Federal Reserve will permit the bank to resume the higher dividend and buyback once it resubmits the correct CCAR data," wrote Jaret Seiberg, a policy analyst for Guggenheim Partners, in an analyst note.

This is the second time this year the results of the Fed's exercise have been called into question.

Only a day after releasing its findings of the agency's Dodd-Frank stress text in March, the central bank was forced to revise its results citing inconsistencies in the treatment of some figures when it made its calculations.

The revision ultimately affected the findings of 15 of the 30 banks. American Express Co. fell to 12.1% Tier 1 common capital, while M&T bumped up to 6.2%.

Donna Borak is the Federal Reserve reporter for American Banker.

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