Bank of America (BofA) is on the hook for a hefty sum after a court ruled it significantly underpaid its deposit insurance fees.
The Case Against BofA
Back in 2017, the Federal Deposit Insurance Corporation (FDIC) sued BofA, claiming the bank hadn’t paid over $1.1 billion in mandatory fees between 2013 and 2014. The FDIC alleged BofA misreported its financial data, leading to lower risk assessments and consequently, lower insurance payments. The core issue was BofA’s method of reporting its “counterparty exposures”—essentially, its financial dealings with other companies. The FDIC argued BofA didn’t report these exposures correctly, leading to artificially lower risk scores and smaller insurance bills.
BofA’s Defense
BofA defended itself, arguing it followed the rules as it understood them. The bank claimed the regulations, put in place after the 2008 financial crisis, were unclear and that the FDIC’s interpretation was unfair. They described the rule as “arbitrary and capricious.”
The Verdict
A district judge sided largely with the FDIC, stating that BofA should have been able to understand and meet the requirements of the 2011 rule. While the judge agreed the rule was valid, the final penalty was significantly less than the FDIC initially sought. Instead of the full $1.12 billion, BofA was ordered to pay over $540.26 million, plus interest. The judge essentially split the difference, acknowledging BofA’s arguments regarding the clarity of the regulations, but ultimately finding in favor of the FDIC.