FDIC said Bank of America understated its counterparty exposure by 'tens of billions of dollars each quarter.' | AP Photo FDIC sues Bank of America for $542 million in deposit insurance payments

The Federal Deposit Insurance Corp. on Monday filed suit against Bank of America, seeking $542 million that the agency says the bank has refused to pay for deposit insurance.

FDIC claims that Bank of America reported incorrect financial information, from the second quarter of 2011 through the first quarter of 2016, that underreported its counterparty exposure.


“During this period, Bank of America ignored the FDIC’s instruction that it report counterparty exposures at the ‘consolidated entity level’ and, in fact, did not consolidate any of its counterparty exposures at all,” the regulator said in its filing. It said Bank of America is the only one of the nine largest banks that did not do so.

Therefore, the FDIC said, Bank of America understated its counterparty exposure by “tens of billions of dollars each quarter.”

“By underreporting its counterparty exposures, Bank of America appeared less risky than it actually was and therefore paid lower quarterly assessments to the FDIC for deposit insurance than it should have,” it added.

The sum sought by the FDIC covers payments from the second quarter of 2013 through the fourth quarter of 2014 — an average of about $77 million per quarter. The regulator said it might amend its complaint, to more than $1 billion, once it has assessed the bank for all of the alleged underpayments.

Bank of America spokesman Lawrence Grayson said the bank “looks forward to the court’s review,” saying the amount is a fraction of its annual payments to the FDIC. “We believe that we are in compliance with the FDIC’s several rules, including those which have been recently reinterpreted,” he said.

In that same vein, Eugene Scalia, a Gibson Dunn attorney representing the bank, said 2014 changes from the regulator gave the relevant 2011 regulation "new meaning.” He also said the FDIC was aware every quarter of what approach the bank was taking.

“We were engaged in ongoing dialogue with the FDIC during which they agreed to provide us additional information, but recently they indicated that they felt they must file suit by mid-January,” Scalia said.

Meanwhile, Cleary Gottlieb lawyer Michael Krimminger, who also represents the bank, criticized the regulator for proceeding. “It is surprising to me that what essentially is an administrative matter that should have been resolved through continued discussions with the bank has resulted in litigation,” Krimminger said.