Federal Judge Rules in Long-Running Case Over Underpaid Deposit Insurance Assessments
In a significant legal development, a U.S. federal judge has ordered Bank of America to pay $540.3 million to the Federal Deposit Insurance Corporation (FDIC) in a long-standing dispute over underpaid deposit insurance assessments. The ruling, made public on April 14, 2025, concludes litigation that began in 2017 when the FDIC accused the bank of underreporting its risk exposure, leading to reduced insurance contributions.
Background of the Dispute
The FDIC’s lawsuit centered on a 2011 regulatory rule change that required banks to report their exposure to counterparties at the consolidated entity level. This change aimed to provide a more accurate assessment of a bank’s risk profile, especially in the aftermath of the 2008 financial crisis. The FDIC alleged that Bank of America failed to comply with this rule, thereby understating its risk and paying lower insurance premiums than required.
Initially, the FDIC sought $1.12 billion, claiming that Bank of America’s underreporting spanned from the second quarter of 2011 through the first quarter of 2016. However, U.S. District Judge Loren L. AliKhan ruled that the FDIC had waited too long to pursue claims for periods before the second quarter of 2013, limiting the recoverable amount to assessments from Q2 2013 through the end of 2014, including interest.
Court’s Findings
In her 59-page decision, Judge AliKhan rejected Bank of America’s arguments that the FDIC’s rule lacked a reasonable basis and that the agency acted arbitrarily. She emphasized that the FDIC was not required to develop a perfect measure for predicting banks’ potential exposure to losses and that Bank of America could not claim it lacked fair notice of its obligations.
The judge’s ruling underscores the importance of regulatory compliance and accurate risk reporting by financial institutions. It also highlights the challenges regulators face in enforcing rules designed to maintain the stability of the banking system.
Bank of America’s Response
Bank of America has consistently denied any intent to evade payments, characterizing the issue as a technical disagreement over regulatory interpretations. Following the court’s decision, the bank stated, “We are pleased the judge has ruled and have reserves reflecting the decision.” The FDIC declined to comment on the ruling.
Despite the financial setback, Bank of America remains financially robust. The Charlotte, North Carolina-based bank reported a first-quarter profit of $7.4 billion and $27.37 billion in revenue net of interest expense, exceeding Wall Street expectations.
Implications for the Banking Industry
This case marks a rare instance of the FDIC suing a bank to recover insurance fees, the first such action in over two decades. It serves as a reminder to financial institutions of the critical importance of adhering to regulatory requirements and the potential consequences of non-compliance.
The decision also reinforces the role of the FDIC in safeguarding the U.S. banking system. Established in 1933 during the Great … insures deposits up to $250, … , providing a safety net for depositors and maintaining public confidence in the financial system.
As the banking industry continues to navigate complex regulatory landscapes, this ruling may prompt institutions to reevaluate their compliance protocols and risk assessment methodologies to ensure alignment with regulatory expectations.
Conclusion
The $540.3 million judgment against Bank of America underscores the enduring impact of post-crisis regulatory reforms and the ongoing efforts of regulators to enforce compliance. While the bank has indicated its readiness to fulfill the court’s order, the case serves as a cautionary tale for the financial sector about the importance of transparency and adherence to regulatory standards.
