Bank of America Corp (BAC) said it would raise its quarterly dividend for the first time in seven years, after the Federal Reserve approved the bank's updated capital plan.

Bank of America's shares rose as much as 2.4 percent after the bank said it would increase its quarterly dividend to 5 cents per shares from 1 cent per share.

The updated capital plan included an increase in common stock dividend but no share repurchases, the second-largest U.S. bank said in a statement on Wednesday.

The bank withdrew in April its previous capital plan, which also included a plan to buy back $4 billion of shares, after it found errors that reduced a key capital level.

The accounting error stemmed from Merrill Lynch & Co's debt, which Bank of America assumed after it bought the investment bank and brokerage during the financial crisis.

Bank of America's payout will increase by $1.68 billion per year based on the number of outstanding shares as of July 28.

Raising the dividend has been a top priority for Chief Executive Brian Moynihan. Prior to the 2008 financial crisis, the bank paid a quarterly dividend of as much as 64 cents per share.

Banks historically paid out relatively high dividends - spurring retirees and other investors to buy their shares - but failed to cut them even as earnings shrank during the financial crisis, burning up valuable capital.

Following the crisis, lawmakers gave regulators increased control over banks' plans to return funds to shareholders.

Bank of America's shares were up 1.6 percent at $15.24 in early trading. Up to Tuesday's close, the stock had fallen about 2.5 percent this year.