Bank of America has been ordered to pay over $540 million after a U.S. district judge ruled that the lender significantly underpaid its deposit insurance fees for more than a year. The decision comes after a lengthy legal battle with the Federal Deposit Insurance Corporation (FDIC).
In 2017, the FDIC filed a lawsuit against BANK OF AMERICA, alleging the bank failed to pay $1.12 billion in mandatory fees between the second quarter of 2013 and the fourth quarter of 2014. The FDIC accused the bank of unjustly enriching itself by retaining the funds.
According to the lawsuit, BANK OF AMERICA inaccurately reported its counterparty exposures, resulting in lower risk scores and reduced insurance payments. A 2016 FDIC audit revealed that the bank had not consolidated its counterparty exposures to the ultimate parent level as required, which significantly lowered its concentration measure and, consequently, its assessment payments.
BANK OF AMERICA argued that it correctly interpreted post-2008 financial crisis regulations designed to strengthen the banking system and enhance risk-based deposit insurance assessments. The bank also claimed it lacked fair notice of the FDIC’s interpretation of the rule, calling it “arbitrary and capricious and procedurally flawed.”
U.S. District Judge LOREN L. ALIKHAN rejected most of the bank’s arguments but reduced the claim by nearly half. Judge ALIKHAN ruled that the FDIC’s 2011 rule was valid and that the bank should have been able to identify the standards it was expected to apply. However, the judge ordered BANK OF AMERICA to pay $540.26 million plus interest, significantly less than the $1.12 billion initially sought by the regulator.
This ruling marks a significant development in the ongoing dispute between the FDIC and one of the nation’s largest financial institutions.
Sources: FDIC, U.S. District Court for the District of Columbia