The Federal Deposit Insurance Corporation (FDIC), a banking regulator, has sued the Bank of America for $542 million over a deposit insurance, which the bank did not pay to the regulator. The regulator has claimed that the bank owed around half a billion dollars in the unpaid deposit insurance. That fee was charged by the FDIC to the banks, to protect customers’ deposits from unforeseen events. This fee has a direct relationship with the company’s size; therefore, in a case of BAC, it had to be a hefty sum.
According to the complaint filed in the federal court in Washington: "Bank of America underreported its counterparty exposures by tens of billions of dollars." The claim has also included that the Bank of America was the only leading bank which understated its counterparty risk. According to the bank’s lawyer, the dispute between the bank and the regulator arose due to a misinterpretation of technical rules regarding the insurance fund.
The lawsuit also stated that the bank’s failure to pay the fee for the insurance protection was for the period of 2013 and 2014. The Bank of America’s spokesman Lawrence Grayson told Charlotte Business Journal: “The amount in question, derived from a technical disagreement about a calculation from several years ago regarding a rule that has had changing provisions over time, comprises a fraction of what we annually pay to the FDIC." The bank is confident that it is in compliance with many FDIC rules. It is convinced that it kept the regulator updated on the calculations made.
It took seven years for the biggest bank in the US (by equity) to resolve many major lawsuits it had on its books. Now once again, the bank has got a trial which will impact its profitability in the short term. BAC has spent $64 billion on legal-related expenses since the financial crises. That pushed its total crises-related expenditure to $191 billion.