BofA Must Defend $542 Million Lawsuit Tied to FDIC Risk Rule
(Bloomberg) -- Bank of America Corp. must defend a lawsuit brought by the Federal Deposit Insurance claiming it owes at least $542 million for deposit insurance that it refuses to pay, a judge ruled.
The details of Tuesday’s ruling denying in part the bank’s request to dismiss the lawsuit were sealed. U.S. District Judge Emmet Sullivan in Washington, D.C., said the opinion will be made public after he reviews proposed redactions from the bank and the regulator. He gave them until April 4 to suggest which parts of the ruling should be redacted.
The FDIC accused the bank in the January 2017 lawsuit of ignoring instructions on how to account for its exposure to counterparties. The agency sued over payments in the last three quarters of 2013 and all of 2014.
Bank of America said at the time that it complied with FDIC rules and regularly updated the regulator on its calculations. It said the matter should have been resolved through discussions rather than litigation. Jerome Dubrowski, a spokesman for Bank of America, declined to comment on Tuesday’s ruling.
The FDIC changed its rules in 2011 to require banks to report counterparty exposure at the consolidated company level. The bank failed to follow the rule in calculating its exposure to its largest counterparty, which wasn’t identified in the complaint, according to the regulator.
For almost two years, the bank understated the amount of insurance protection it owed in connection with its 20 biggest counterparties because it didn’t properly add up all of the exposure its parent-level company faces, the FDIC claimed. That resulted in a miscalculation owed the fund, according to the suit.
On Dec. 1, 2016, Bank of America gave the FDIC the correct data on its counterparty exposures. Of the nine largest banks, only Bank of America failed to follow the rule, according to the complaint.
The case is FDIC v. Bank of America, 17-cv-00036, U.S. District Court, District of Columbia (Washington).
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