Bank of America Required to Pay $540.3 Million in FDIC Lawsuit

Bank of America is set to pay $540.3 million following a judge’s verdict in a lawsuit where the Federal Deposit Insurance Corp. (FDIC) accused the bank of underpaying for deposit insurance.

The judge’s ruling was released on Monday (April 14), according to a report by Reuters.

In 2017, the FDIC sued Bank of America for $1.12 billion, claiming the bank did not comply with a 2011 regulation that altered how banks report risk exposure to counterparties, thereby decreasing its deposit insurance payments, as detailed in the report.

Bank of America disputed allegations that it aimed to avoid payments, the report mentioned.

The judge dismissed the bank’s argument that there was no valid reason for the rule, asserting that the FDIC was not obligated to create a “perfect measure” for predicting banks’ potential losses, as per the report.

Nonetheless, the judge also determined that the FDIC filed its lawsuit too late to claim assessments prior to the second quarter of 2013. Consequently, the payments imposed on the bank cover the period from the second quarter of 2013 until the end of 2014, stated the report.

Bill Halldin, a spokesperson for Bank of America, said: “We are pleased the judge has ruled and have reserves reflecting the decision.”

This ruling coincides with a period of significant transformation for the FDIC and other regulatory bodies.

Travis Hill, the FDIC’s new acting chairman since January, announced at the beginning of the new administration that he intends to “conduct a comprehensive review of regulations, guidance, and manuals” and “embrace a more open-minded stance on innovation and technology adoption, including (1) adopting a more transparent approach to FinTech collaborations and digital assets and tokenization, and (2) engaging to manage rising technology costs for community banks.”

Additionally, Hill stated that the FDIC aims to “foster more de novo activities to ensure a robust pipeline of new entrants into the banking sector.”

In March, new guidance from the FDIC indicated that FDIC-supervised institutions are now allowed to participate in crypto-related activities without having to seek prior FDIC approval, as long as they properly handle the associated risks.

Previously, a now-rescinded guidance required institutions to notify the FDIC before engaging in those activities.