Bank Of America Ordered To Pay $540 Million Over FDIC Lawsuit

Bank of America has been forced to pay the Federal Deposit Insurance Corporation (FDIC) $540.3 million in order to resolve a case that has been underway since 2017. This is a big milestone in the legal system. A lawsuit was filed against the bank, alleging that it failed to properly declare its counterparty exposures, which resulted in the bank failing to pay obligatory deposit insurance assessments.

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The Origins of the Lawsuit

The disagreement may be traced back to a change in regulatory regulation that was implemented in 2011 and required financial institutions to report counterparty exposures at the level of consolidated entities. Bank of America was accused by the Federal Deposit Insurance Corporation (FDIC) of violating this requirement, which resulted in the company’s exposure to counterparties being underreported. As a consequence of this, the bank paid deposit insurance premiums that were lower than what was necessary, which the FDIC assessed to be more than one billion dollars.

Bank Of America Ordered To Pay $540 Million Over FDIC Lawsuit

The United States District Judge Loren L. AliKhan made a verdict on March 31, 2025, ordering Bank of America to pay $540.3 million. This ruling came after years of legal processes for the defendant. The unpaid assessments that occurred from the second quarter of 2013 until the end of 2014 are covered by this figure, which also includes interest rates. The judge also pointed out that the FDIC had been too slow in pursuing claims for earlier time periods, which had a negative impact on the amount of money that might be paid out.

Bank of America’s Response

The ruling of the court was accepted by Bank of America, which also claimed that it had reserves put aside to fund the payment. The bank stressed that it conformed with the requirements of the FDIC and that it considered the matter to be a dispute of a technical nature. In spite of the decision, the bank continues to be in a strong financial position, as evidenced by the bank’s first-quarter profit of $7.4 billion for the year 2025.

The Consequences for the Financial Services Sector

The significance of complying to regulatory standards, particularly those that are associated with risk reporting, is brought into focus by this particular situation. As a result of this order, financial institutions are reminded of the potential implications that might result from non-compliance, which may include large financial penalties. In addition, it emphasizes the Federal Deposit Insurance Corporation’s (FDIC) dedication to ensuring that banks contribute their appropriate proportion to the Deposit Insurance Fund, which serves to safeguard depositors in the event that a bank fails.

Anticipating the Future

Bank of America is now processing the necessary payment in accordance with the court’s ruling, which was issued in April 2025. Further comments on the topic have been rejected by the FDIC. This case sets a high bar for future disagreements between banks and government agencies, highlighting the need of open dialogue and compliance with rules and regulations.

What Is The Significance Of The 2011 Regulatory Rule In This Case?

The 2011 rule required banks to report counterparty exposure on a consolidated basis, meaning they needed to combine exposures across all related entities. Bank of America was accused of reporting at the individual level instead. This key difference changed the risk calculation, ultimately affecting how much the bank was supposed to pay.

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What Was The Amount Bank Of America Was Ordered To Pay In The FDIC Lawsuit?

Bank of America was ordered to pay $540.3 million in a court decision related to a dispute with the FDIC. This large payment covers shortfalls in deposit insurance contributions over a specified period. The ruling came after years of back-and-forth, confirming that the bank owed significantly more than it initially reported in required insurance payments.

Who Filed The Lawsuit Against Bank Of America?

The lawsuit was filed by the Federal Deposit Insurance Corporation, commonly known as the FDIC. They accused Bank of America of underpaying its required deposit insurance fees. The case centered on how the bank calculated its exposure to financial risk, which directly impacted how much it owed under federal insurance regulations.

When Was The Lawsuit Against Bank Of America Filed?

The legal action was filed back in 2017. It stemmed from concerns over how the bank handled its insurance contributions for several quarters between 2013 and 2014. It took several years for the case to reach a final ruling, which came in early 2025 after lengthy court proceedings.

What Was The Basis Of The FDIC’s Lawsuit Against Bank Of America?

The FDIC claimed that Bank of America underreported certain financial risks tied to its exposure to other parties. By doing so, the bank paid less than it should have toward federal deposit insurance. The core issue was how the bank calculated its risk profile, which determines how much it owes in insurance assessments.

What Rule Did Bank Of America Allegedly Fail To Follow?

Bank of America was accused of misapplying a regulatory rule introduced in 2011. This rule required banks to report financial exposures to counterparties on a consolidated basis. Essentially, the FDIC argued that the bank did not correctly group related entities when calculating risk, which led to underpayment of insurance fees.

How Much Did The FDIC Initially Estimate The Underpayment To Be?

When the FDIC first looked into the matter, it believed the underpayment exceeded $500 million. Later, that number grew significantly as additional quarters and interest were factored in. The case became more complex as calculations evolved, and by the end of litigation, the agency was seeking more than a billion dollars.

What Was The Final Amount Bank Of America Was Ordered To Pay?

After a lengthy court process, Bank of America was officially ordered to pay $540.3 million. That figure includes both the principal underpayment and accrued interest. The judgment covered specific quarters between 2013 and 2014. While the total sought by the FDIC was higher, the court limited the timeframe due to legal constraints.

Over What Period Did The Underpayments Occur?

The underpayments occurred from the second quarter of 2013 through the end of 2014. During this time, Bank of America allegedly calculated its insurance fees using outdated or incorrect methods. That miscalculation led to reduced payments to the FDIC, which ultimately triggered the legal battle and financial penalties.

Who Was The Judge Presiding Over The Case?

The case was overseen by a U.S. District Judge who issued the final ruling in March 2025. The judge’s decision balanced the arguments from both sides but ultimately sided with the FDIC for part of the claims. This led to a substantial payment being ordered, although not the full amount the FDIC originally demanded.

What Was The Judge’s Ruling Regarding The FDIC’s Claims?

The judge ruled that Bank of America did underpay deposit insurance fees during a specific period. However, the court also found that older claims by the FDIC were filed too late and dismissed them. In the end, the judge approved a payment of over $540 million, covering only the valid, timely claims.

Did The FDIC Sue Bank Of America Over Earlier Assessments?

Yes, the FDIC tried to include underpayments that occurred before 2013. However, the court found that these earlier claims were outside the legal time window and could not be considered. As a result, the judgment focused only on the more recent periods where underpayment was both proven and still actionable.

What Was Bank Of America’s Response To The Lawsuit?

Bank of America responded by denying intentional wrongdoing. The bank argued that its interpretation of the rules was valid and that it complied in good faith. After the court ruling, it said it had already prepared for the financial impact by setting aside reserves, signaling that it anticipated a potential loss.

Did Bank Of America Acknowledge Any Wrongdoing?

No, Bank of America did not admit to any wrongdoing. It maintained that the issue was based on differing interpretations of complex regulations. The bank emphasized that it acted in accordance with its understanding of the rules and had no intent to mislead or avoid its financial obligations to the FDIC.

How Did Bank Of America Prepare For The Potential Outcome?

Anticipating a possible adverse ruling, Bank of America had already set aside financial reserves to absorb the potential payment. This is a common risk management move for large institutions facing regulatory or legal disputes. The preparation helped reduce the financial shock when the ruling and final payment amount were announced.

What Is The FDIC’s Role In The Banking System?

The FDIC plays a key role in maintaining public confidence in the U.S. banking system. It insures deposits, supervises financial institutions, and steps in to resolve failing banks. One of its major responsibilities is collecting insurance premiums from banks to fund coverage in case of bank failures, ensuring consumer deposits remain safe.

What Is The Purpose Of The FDIC’s Deposit Insurance Program?

The deposit insurance program protects customers’ money in the event their bank fails. If a bank collapses, the FDIC steps in to reimburse depositors up to a certain limit. This safety net is essential for trust in the banking system and helps prevent panic-driven bank runs during financial instability.

How Does The FDIC Determine The Insurance Premiums For Banks?

The FDIC charges insurance premiums based on each bank’s size, risk profile, and financial exposures. Higher-risk banks pay more, while well-managed, low-risk institutions pay less. The formula also considers counterparty exposure, which was a critical point in the case with Bank of America. Accurate reporting is crucial to get fair assessments.

What Is The Maximum Deposit Amount Insured By The FDIC?

Currently, the FDIC insures up to $250,000 per depositor, per bank, for each account ownership category. This means if a customer has multiple accounts in different categories at the same bank, they may be covered for more than $250,000 in total. This insurance limit has helped build trust in the banking system.

What Was The FDIC’s Allegation Regarding Bank Of America’s Reporting Practices?

The FDIC claimed Bank of America used an outdated method for reporting counterparty exposure. According to regulators, this reduced the bank’s risk profile on paper, leading to smaller insurance payments than it actually owed. The agency believed this reporting error wasn’t just a technical oversight—it significantly lowered the bank’s contributions.

How Did Bank Of America’s Reporting Practices Affect Its Insurance Premiums?

By underreporting exposure to financial counterparties, Bank of America effectively presented itself as less risky than it truly was. This lowered its required insurance premiums under FDIC guidelines. The result? Substantial underpayments over several quarters, which the FDIC later sought to recover through legal action and eventually succeeded in court.

What Is Counterparty Exposure In Banking Terms?

Counterparty exposure refers to the risk a bank takes on when doing business with other financial institutions. If one of those counterparties fails or defaults, it can affect the bank’s own financial health. Regulators track this closely because it’s a major factor in assessing how much risk a bank brings to the system.

How Did Bank Of America’s Counterparty Exposure Affect Its Insurance Calculations?

The FDIC argued that Bank of America didn’t fully report its exposure to related entities, which made the bank look safer than it was. That lower risk rating meant the bank paid smaller insurance premiums than it should have. When the correct exposures were considered, the bank’s payment obligations rose significantly.

What Is The Significance Of The 2011 Regulatory Rule In This Case?

The 2011 rule required banks to report counterparty exposure on a consolidated basis, meaning they needed to combine exposures across all related entities. Bank of America was accused of reporting at the individual level instead. This key difference changed the risk calculation, ultimately affecting how much the bank was supposed to pay.

How Did The 2011 Rule Change The Reporting Requirements For Banks?

The 2011 rule required banks to report counterparty exposure on a consolidated basis, meaning that banks had to group all related entities when calculating financial risk. This was a shift from previous regulations, which allowed banks to report exposures separately. The goal was to give regulators a more accurate picture of a bank’s overall risk profile.

What Was Bank Of America’s Argument Regarding The 2011 Rule?

Bank of America argued that it had complied with the 2011 rule, asserting that its method for reporting financial exposures was valid. They believed they had adhered to the regulation, interpreting it differently than the FDIC. The bank maintained that its approach was in good faith and that it was not required to group entities as the FDIC insisted.

Did The FDIC Agree With Bank Of America’s Interpretation Of The Rule?

No, the FDIC did not agree with Bank of America’s interpretation of the 2011 rule. The FDIC believed that the bank’s method for reporting counterparty exposure was incorrect. According to the FDIC, the bank’s failure to consolidate related entities resulted in an underreporting of financial risk, leading to significantly lower deposit insurance payments than required by law.

What Was The FDIC’s Position On Bank Of America’s Reporting Practices?

The FDIC argued that Bank of America’s reporting practices were flawed, especially when calculating counterparty exposure. The FDIC claimed that the bank’s failure to follow the 2011 rule properly resulted in a lower risk profile, which, in turn, led to underpayment of deposit insurance premiums. The FDIC contended that these practices violated regulatory requirements.

How Did The Court Address The Statute Of Limitations Issue In The Case?

The court addressed the statute of limitations by examining the timeline of the FDIC’s claims. The FDIC had initially sought to recover payments for periods beyond the legal window allowed for claims. However, the court found that only claims filed within the proper time frame were valid, dismissing those that were outside the statutory limits.

What Was The FDIC’s Argument Regarding The Statute Of Limitations?

The FDIC argued that the statute of limitations should not apply to certain claims because the bank’s underreporting was an ongoing issue. They claimed that since the improper reporting persisted over time, the FDIC could address it for the entire duration of the underpayment. The FDIC wanted to recover all unpaid insurance premiums over multiple years.

How Did The Court Rule On The Statute Of Limitations Issue?

The court ruled in favor of the statute of limitations, dismissing claims that fell outside the allowed period. While the FDIC’s argument about ongoing underreporting was considered, the court adhered to legal boundaries, limiting the recovery to a specific window of time. This resulted in the exclusion of some earlier claims from the final judgment.

What Was The Outcome Of The Case For The FDIC?

For the FDIC, the case ended with a significant financial victory. The court ruled that Bank of America owed $540.3 million in underpaid insurance premiums. This outcome reinforced the FDIC’s ability to enforce compliance with banking regulations and ensured that the bank’s failure to report properly was addressed, benefitting the broader deposit insurance system.

What Was The Outcome Of The Case For Bank Of America?

For Bank of America, the outcome was costly but somewhat mitigated. The bank was ordered to pay $540.3 million in underpaid deposit insurance premiums. While the case did not result in penalties beyond financial restitution, it highlighted the importance of adhering to regulations. The bank also did not admit to wrongdoing, maintaining its defense throughout the trial.

How Did The Ruling Affect Bank Of America’s Financial Position?

The ruling had a financial impact on Bank of America, requiring them to pay over $540 million in insurance premiums. While the bank had set aside reserves to cover the potential costs, the payout still affected its finances. However, the preparation for this outcome helped soften the blow, ensuring the bank could absorb the penalty without major disruption.

What Is The Significance Of The $540 Million Payment For Bank Of America?

The $540 million payment is significant for Bank of America as it underscores the consequences of failing to comply with regulatory requirements. This ruling serves as a reminder of the financial obligations that banks must meet to ensure the stability of the deposit insurance system. It also marks a costly chapter for the bank in terms of legal and financial accountability.

How Does The Ruling Reflect The FDIC’s Enforcement Authority?

The ruling demonstrates the FDIC’s strong enforcement authority over financial institutions. It reinforces the agency’s ability to hold banks accountable for underpayment of deposit insurance premiums and ensures that banks follow reporting regulations accurately. The decision validates the FDIC’s role in safeguarding the deposit insurance system, making sure that banks contribute fairly based on their actual risk.

What Precedent Does This Case Set For Future FDIC Enforcement Actions?

This case sets an important precedent for future FDIC enforcement actions. It emphasizes that the FDIC has the power to demand substantial payments when banks fail to report their financial risks correctly. The ruling also clarifies the application of the 2011 reporting rules and strengthens the FDIC’s ability to enforce compliance, particularly concerning insurance premiums.

How Does This Case Illustrate The Importance Of Accurate Reporting By Banks?

This case highlights how crucial accurate financial reporting is for banks. Misreporting exposures, whether intentional or accidental, can result in significant financial consequences. Banks must be diligent in following regulatory rules to ensure they meet their obligations. Accurate reporting ensures that the deposit insurance system works properly, protecting consumers and maintaining trust in the financial system.

What Lessons Can Other Banks Learn From Bank Of America’s Experience?

Other banks can learn several key lessons from Bank of America’s experience: the importance of understanding and adhering to regulatory rules, the necessity of accurate reporting, and the financial risks of failing to comply. This case illustrates that even large institutions can face severe penalties if they don’t follow the rules regarding financial exposures and insurance premiums.

How Does This Case Impact Public Trust In The Banking System?

This case could impact public trust in the banking system by reminding consumers that even large banks must be held accountable for regulatory failures. While the FDIC’s actions ensure that the system remains secure, the financial penalties faced by Bank of America might cause some to question the practices of major institutions. However, it also reinforces the importance of transparency in banking.

What Are The Potential Implications Of This Ruling For Other Financial Institutions?

The ruling could have wide-ranging implications for other financial institutions, as it sets a precedent for how the FDIC enforces deposit insurance regulations. Banks may become more cautious about their reporting practices, ensuring full compliance to avoid similar legal challenges and hefty penalties. It emphasizes the importance of proper financial risk assessment and transparent reporting.

How Did The FDIC Respond To The Court’s Ruling?

The FDIC welcomed the court’s ruling, seeing it as a victory for enforcing fair contributions to the deposit insurance fund. The agency emphasized that the decision reinforced its role in maintaining banking stability and protecting consumers. The FDIC was pleased that the court sided with its interpretation of the reporting rules, holding the bank accountable.

What Is The FDIC’s Policy On Enforcing Deposit Insurance Regulations?

The FDIC’s policy is to strictly enforce deposit insurance regulations to ensure that all banks contribute fairly to the deposit insurance fund. The agency takes a proactive approach by regularly reviewing financial institutions’ compliance with reporting requirements. When discrepancies are found, the FDIC pursues legal action, as seen in the case with Bank of America, to secure payment.

How Does The FDIC Ensure Compliance With Its Regulations?

The FDIC ensures compliance by conducting regular audits and reviews of banks’ financial disclosures and practices. It examines how banks report risk exposure, ensuring that they follow required guidelines. If non-compliance is detected, the FDIC works to resolve the issue, often through penalties, legal actions, or negotiations. Enforcement actions help maintain fairness in the banking system.

What Are The Consequences For Banks That Fail To Comply With FDIC Regulations?

Banks that fail to comply with FDIC regulations face severe consequences, including financial penalties, lawsuits, and reputational damage. Non-compliance with reporting requirements, such as underreporting financial exposure, can result in the FDIC seeking back payments, penalties, and interest. Persistent violations can also lead to heightened scrutiny and a loss of trust with customers and regulators.

How Does The FDIC Determine The Amount Of Underpayment By Banks?

The FDIC determines the underpayment amount by reviewing banks’ financial records and comparing them to the required contributions based on their risk exposure. It evaluates whether banks accurately reported their financial positions, including counterparty exposures. If discrepancies are found, the FDIC recalculates the insurance premiums owed and assesses the amount of underpayment, plus interest.

What Role Do Federal Courts Play In FDIC Enforcement Actions?

Federal courts play a crucial role in FDIC enforcement actions by serving as the venue for legal disputes between the agency and financial institutions. When a bank contests an enforcement action, the court evaluates the case based on the law and facts presented. The court ultimately determines whether the bank violated regulations and what penalties, if any, should apply.

How Does The Judicial System Support The FDIC’s Regulatory Efforts?

The judicial system supports the FDIC’s regulatory efforts by providing a legal framework for enforcing banking laws and regulations. Courts evaluate disputes impartially, ensuring that both the FDIC and financial institutions are treated fairly. In cases where banks fail to comply with regulations, the judicial system upholds the FDIC’s authority to hold them accountable through financial penalties.

What Is The Process For A Bank To Contest An FDIC Enforcement Action?

To contest an FDIC enforcement action, a bank must first receive formal notice of the agency’s findings. The bank can then file a legal challenge in federal court, where it will present arguments and evidence to dispute the claims. The court will review the case, evaluate the bank’s defense, and issue a ruling, which may involve further negotiation.

How Did Bank Of America Contest The FDIC’s Enforcement Action?

Bank of America contested the FDIC’s enforcement action by arguing that its reporting practices complied with the law. The bank claimed that it interpreted the 2011 rule correctly and had no intention of underreporting its financial exposures. Bank of America presented its defense in court, hoping to avoid the substantial penalties sought by the FDIC.

What Legal Arguments Did Bank Of America Present In Its Defense?

Bank of America argued that it had followed the 2011 regulatory rule accurately, claiming that its reporting method for counterparty exposures was valid. The bank also contended that it acted in good faith, and any miscalculations were unintentional. Additionally, it argued that the FDIC misinterpreted the law regarding how related entities should be reported.

How Did The Court Evaluate Bank Of America’s Legal Arguments?

The court carefully evaluated Bank of America’s legal arguments by analyzing the 2011 regulatory rule and the bank’s reporting practices. It considered whether the bank’s interpretation was reasonable and whether it had met its obligations under the law. Ultimately, the court sided with the FDIC on the majority of the claims, dismissing some aspects of the bank’s defense.

What Evidence Did The FDIC Present To Support Its Claims?

The FDIC presented evidence showing that Bank of America had underreported its counterparty exposure during the 2013-2014 period. This evidence included detailed financial documents that demonstrated discrepancies between the bank’s reported risk and the actual exposure. The FDIC argued that the bank’s failure to consolidate related entities resulted in lower deposit insurance premiums being paid.

How Did The Court Assess The Evidence Presented By Both Parties?

The court assessed the evidence presented by both parties by examining financial records, regulatory guidelines, and expert testimony. It compared the bank’s reporting to the FDIC’s interpretation of the law. The court weighed the evidence to determine whether Bank of America’s actions were in line with regulatory requirements and concluded that the FDIC’s claims were largely valid.

What Was The Court’s Rationale For Its Final Ruling?

The court’s rationale for its final ruling was based on the finding that Bank of America had misinterpreted the 2011 reporting rule, leading to underpayment of insurance premiums. The court emphasized the importance of accurate risk reporting and held that the bank’s failure to properly report counterparty exposure resulted in a financial loss to the FDIC’s deposit insurance fund.

How Does This Case Reflect The Balance Between Regulatory Oversight And Corporate Compliance?

This case illustrates the delicate balance between regulatory oversight and corporate compliance. The court’s ruling underscores the importance of ensuring that financial institutions comply with regulations to maintain a fair and stable financial system. It also highlights the role of regulators, like the FDIC, in holding corporations accountable while respecting their right to contest enforcement actions.

What Are The Broader Implications Of This Case For Financial Regulation?

This case has broader implications for financial regulation, emphasizing the need for clear and consistent reporting standards. It highlights the importance of transparency and accountability in the banking sector. Financial institutions may now face increased scrutiny and enforcement, ensuring better compliance with regulations that safeguard consumer deposits and the overall stability of the banking system.

How Does This Case Highlight The Importance Of Regulatory Clarity For Financial Institutions?

This case demonstrates how crucial regulatory clarity is for financial institutions. Banks need to understand and correctly interpret the rules to avoid costly penalties. The ruling reinforces that unclear or misinterpreted regulations can lead to significant financial consequences, stressing the need for clear guidelines to ensure compliance and reduce the risk of legal disputes.

What Steps Can Banks Take To Avoid Similar Legal Challenges?

To avoid similar legal challenges, banks should prioritize accurate financial reporting and ensure compliance with all regulatory guidelines. Regular internal audits, transparent risk assessment practices, and staying up-to-date with regulatory changes can help prevent discrepancies. Banks should also seek legal advice to clarify complex regulations and ensure they meet all legal requirements.

How Does This Case Affect The Relationship Between Banks And Regulators?

This case could impact the relationship between banks and regulators by fostering greater awareness of the need for clear communication and adherence to rules. Banks may become more proactive in their regulatory compliance efforts, while regulators like the FDIC may continue to enforce strict oversight. The case encourages a more cooperative approach to financial regulation.

What Future Developments Should Stakeholders Monitor In The Aftermath Of This Ruling?

Stakeholders should monitor any potential changes in banking regulations or enforcement policies that could arise from this case. Future developments may include stricter compliance requirements, enhanced audits, or even legislative changes to clarify the reporting rules. Additionally, the FDIC’s ongoing actions could set the tone for future regulatory enforcement in the banking industry.

Final Thought

The case where Bank Of America was ordered to pay $540 million over an FDIC lawsuit is a strong reminder that even the biggest banks aren’t immune to regulatory missteps. Whether it was a technical reporting error or a broader oversight, the outcome is clear: compliance matters, and mistakes can be costly. This ruling doesn’t just hit Bank of America’s wallet—it sends a message to the entire financial sector about the importance of transparency and accountability. While the bank remains financially strong, this legal battle will likely push other institutions to re-evaluate how closely they follow the rules.