Bank of America Ordered to Pay Over $540 Million for Underpayment of Deposit Insurance Fees
By Henry Kanapi, April 18, 2025
In a significant ruling, Bank of America (BofA) has been ordered to pay $540,261,499 due to a massive underpayment of deposit insurance fees following a lawsuit brought by the Federal Deposit Insurance Corporation (FDIC). The judgment highlights serious regulatory compliance issues within the banking giant, stemming from failures that occurred over a decade ago.
Background of the Case
The lawsuit filed by the FDIC in 2017 alleged that Bank of America failed to pay approximately $1.12 billion in required deposit insurance fees from the second quarter of 2013 through the fourth quarter of 2014. The financial institution was accused of unjust enrichment, meaning it benefited financially by withholding the mandated fees. This failure to pay was reportedly linked to BofA’s inaccurate reporting of its counterparty exposures, which resulted in lower risk score assessments and reduced insurance fees.
A critical finding during an FDIC audit in 2016 uncovered that Bank of America had not accurately consolidated its counterparty exposures at the ultimate parent level as required by regulations. This error led to a decreased concentration measure for the bank, contributing to the significantly lower insurance payments during the periods in question.
Court Ruling
U.S. District Judge Loren L. Alikhan presided over the case and ultimately rejected most of Bank of America’s defenses, while still reducing the FDIC’s claim substantially. Judge Alikhan confirmed that the regulation in question was valid and that the FDIC acted properly in its pursuit of the underpaid fees. However, the court ruled that rather than the original claim of $1.12 billion, Bank of America was liable for just over $540 million plus interest.
In his ruling, Judge Alikhan commented on the responsibility of financial institutions to understand and adhere to regulatory standards, stating, “The court agrees with the FDIC that, after reading the text of the 2011 Rule and ‘acting in good faith,’ [BofA] should have been able to ‘identify[] with ascertainable certainty, the standards’ it was expected to apply.”
Bank of America’s Position
Following the judgment, Bank of America maintained that it had adequately interpreted the regulatory framework created after the 2008 financial crisis, which was designed to enhance the stability of the banking sector and improve risk-based deposit insurance assessments. The bank contended that it had not received fair notice regarding the FDIC’s interpretation of these regulations and described the rules as "arbitrary and capricious and procedurally flawed."
Implications for the Banking Sector
This ruling marks a notable moment in regulatory enforcement within the banking industry, emphasizing the necessity for financial institutions to comply with federal regulations regarding deposit insurance. The decision could serve as a precedent for future cases, reinforcing the responsibilities that banks hold in accurately reporting their financial data and obligations to regulatory bodies.
As the financial landscape continues to evolve, this ruling is a reminder of the critical importance of compliance and accountability in maintaining trust within the banking system.
Conclusion
Bank of America’s substantial liability underscores the complexities of regulatory compliance in the financial sector. While the bank has expressed its intent to challenge certain aspects of the ruling, the outcome is likely to have significant repercussions, not only for BofA but for the broader banking industry as it navigates its obligations to regulators and shareholders alike.
For ongoing updates on this case and other financial news, be sure to subscribe to our newsletter.
Share this article:
