The Federal Deposit Insurance Corporation (FDIC) brought an action against the bank for unpaid assessments to the FDIC based on improperly reported counterparty data used to calculate risk premiums. In 2011, the FDIC amended 12 C.F.R. § 327.9, which covered the calculation of risk premiums paid by highly complex institutions (HCI), such as the bank. The rule “defined ‘counterparty exposure’ as ‘the sum of Exposure at Default (EAD) associated with derivatives trading and Securities Financing Transactions (SFTs) and the gross lending exposure (including all unfunded commitments) for each counterparty or borrower at the consolidated entity level.’” The top twenty counterparty exposures at the consolidated entity level formed an important factor in the assessment calculation. An FDIC audit discovered that from Q1 2012 through Q4 2014, the bank did not consolidate counterparties completely in its reporting by failing to account for exposures from entity subsidiaries or “other members of the counterparty’s corporate family.” The unconsolidated report produced lower counterparty risk concentration scores in the risk analysis, thereby reducing the calculated premiums. The FDIC requested that the bank pay the difference in calculated premiums totaling over a billion dollars. The bank challenged both the rule’s creation and the definition of “consolidated entity level.” Moreover, the bank also challenged the timeliness of the FDIC’s request for the alleged unpaid assessment for Q1 2012 through Q1 2013 under the statute of limitations. The FDIC sought disgorgement of profit on a theory of unjust enrichment from the unpaid assessment.
In FDIC v. Bank of Am., N.A., 783 F. Supp. 3d 1 (D.D.C. 2025), the court held that the FDIC properly promulgated the amendment to the rule 12 C.F.R. § 327.9. In light of Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), the court independently interpreted the Federal Deposit Insurance Act (FDIA) and found the amended rule (1) consistent with the FDIA; and (2) neither arbitrary, capricious, nor procedurally flawed. The court agreed that the FDIC possessed broad statutory authority to design risk-based scorecards. Moreover, the FDIC had used “reasoned decision making” in compliance with the Administrative Procedures Act, and, at the time of its creation, identified a rational connection between its mandate and determining the risk of financial and systemic loss. As its basis for that holding, the court adopted the Fourth Circuit finding that the FDIA “expressly gives the FDIC considerable discretion by allowing the FDIC to consider ‘any other facts the FDIC determines are relevant’ in calculating an institution’s semiannual assessment.” Doolin Sec. Sav. Bank, F.S.B. v. FDIC, 53 F.3d 1395 (4th Cir. 1995). The court ruled that the FDIC also demonstrated the robust nature of models stemming from the rule and provided sufficient notice of the rule and its methodology. Additionally, the court determined that the FDIC complied with the “logical outgrowth doctrine” because its final rule provided a logical outgrowth of the proposed rule. With the rule declared valid, the court then interpreted the phrase “consolidated entity level” to determine whether the bank had violated the rule. The court found the meaning within 12 C.F.R. § 327.9 unambiguous as requiring consolidation “up to the ultimate parent level on the counterparty side of the ledger.” The court relied on financial, legal, and accounting dictionaries to support the plain meaning of “consolidated entity level” and affirmed its interpretation by reference to the term’s use in the rule and in context. The court then rejected the bank’s fair notice defense to its liability for noncompliance, finding that the bank could have simply read the rules unambiguously. Additionally, testimony revealed that the bank may not have read the amended rules and never sought guidance from the FDIC, despite the ability to do so. Once the issue of liability was settled, the court considered remedies. The court permitted recovery for the FDIC’s timely complaints for quarters of Q2 2013 through Q4 2014 but denied its remaining claims. The court held that no exceptions, tolling, or reset applied to the three-year statute of limitations for the claims from Q1 2012 through Q1 2013, thereby reducing the assessment for those quarters. Lastly, the court found no statutory support in 12 U.S.C.S. 1817(h)’s savings clause for the FDIC seeking to recover additional amounts to the assessment based on disgorgement, which the court referred to as an “extraordinary remedy.” The court ruled against granting equitable relief where the plaintiff already possessed an available remedy. Lastly, the court rejected the bank’s equitable defenses of acquiescence, estoppel, and waiver. It acknowledged that the bank could raise these defenses against the FDIC; however, the court did not find any misconduct “so ‘egregious’” as to make them applicable here. In conclusion, the court granted the motions in part and denied the motions in part, finding in favor of the FDIC and holding the bank liable for “the underpaid assessments from 2Q 2013 through 4Q 2014, plus pre- and post-judgment interest.”
By Will Strum [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Hayden Mariott [email protected]
Edited By Kristin Meurer [email protected]