Bank of America Faces $540 Million Penalty Over Insurance Dispute

FARGO, ND – A federal judge ordered Bank of America to pay $540.3 million in a lawsuit brought by the Federal Deposit Insurance Corporation (FDIC), which accused the bank of underpaying assessments to a deposit insurance fund. The ruling was made public on Monday, April 14.

U.S. District Judge Loren AliKhan determined that Bank of America owed the sum due to underpayments from the second quarter of 2013 through the end of 2014, plus accrued interest. This legal battle dates back to a lawsuit filed by the FDIC in 2017, which initially sought $1.12 billion, asserting that the bank did not comply with a 2011 regulation aimed at changing how banks report risk exposure to counterparties.

At the core of the issue was the claim that Bank of America had underreported its exposure figures, leading to lower-than-required payments into the deposit insurance fund. Bank of America maintained that it did not evade its payment obligations and raised questions about the regulation’s clarity.

In his ruling, Judge AliKhan rejected the bank’s arguments, stating, “After reading the text of the 2011 rule and acting in good faith, Bank of America should have been able to determine with reasonable certainty the standards it was expected to apply.” The ruling reinforced the FDIC’s authority in enforcing financial regulations.

“We are pleased the judge has ruled and have reserves reflecting the decision,” said Bill Halldin, a spokesperson for Bank of America. The judgment reflects a tightening regulatory environment for banks, and this case underscores the importance of compliance with federal rules that aim to enhance financial stability.

The ruling coincides with a broader shift in regulatory policy under the FDIC’s new acting chairman, Travis Hill, who has expressed intentions to review and adapt regulations to better accommodate innovation and technology within the banking sector.

As Bank of America braces for potential implications of the ruling, it is scheduled to release its first-quarter earnings report on Tuesday, which analysts predict will be scrutinized for market reactions.

This decision emphasizes the regulatory scrutiny banks face as they navigate a demanding financial landscape. Market observers are keenly aware of how this ruling might influence investor confidence and shape future banking policies.