The FDIC and Bank of America are set to square off in a dispute over the bank regulator’s deposit insurance assessments that could cost one of America’s largest banks at least $1.1 billion.
After years of delay caused by the pandemic and other events, Magistrate Judge Moxila A. Upadhyaya of the US District Court for the District of Columbia is set to hear Tuesday oral arguments on the two sides’ cross-motions for summary judgment in the case. She is expected to release a report and recommendations about the case in the coming months.
Judge Emmet G. Sullivan, also of the DC district court, will review Upadhyaya’s report and recommendations and issue a final ruling.
The Federal Deposit Insurance Corp. crafted a rule in 2011 that reformed the way the largest, most complicated banks calculate their deposit insurance payments. The agency alleged in a 2017 lawsuit in the DC court that Bank of America NA, the federally insured banking subsidiary of Bank of America Corp., didn’t comply with the rule and underpaid the agency for deposit insurance coverage by improperly miscalculating from 2012 through 2014 its exposures to other large financial institutions.
The original suit sought $542 million from Bank of America, but an amended complaint expanded the time frame for underpayments.
Bank of America counters that the 2011 FDIC rule was unclear and the agency’s rulewriting process violated the Administrative Procedure Act. The Charlotte, NC-based bank isn’t challenging a 2014 deposit insurance rule that it is now complying with.
Sullivan denied Bank of America’s motion to dismiss the case in March 2018. A combination of discovery battles, the Coronavirus pandemic, and a wave of Jan. 6 insurrection-related cases that flooded the DC court slowed the case down.
The case has run so long that it is now on its third magistrate judge. One of Bank of America’s attorneys, Gibson Dunn & Crutcher LLP’s Eugene Scalia, served as the US Secretary of Labor from September 2019 until January 2021 before returning to the case.
The FDIC insures deposits up to $250,000 at member banks and charges those banks an assessment to replenish the deposit insurance fund.
The FDIC declined to comment. Bank of America referred reporters to its public legal filings.
According to the FDIC, all other large banks have complied with its deposit insurance rules since they were rewritten in 2011, and Bank of America initially followed them.
Bank of America’s “status as the only bank among peers to not consolidate counterparty risk undercuts its defenses,” Bloomberg Intelligence legal analyst Elliott Stein said in a research note.
The case is FDIC v. Bank of America NA, D.D.C., No. 1:17-cv-00036, Oral Arguments 1/24/23.
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