America’s banking crisis is far from over, with some of the country’s largest banks stiff in deep water. Bank of America has been in the spotlight recently for bond market paper losses, overcharging customers, and opening dodgy accounts.
On July 11, it was reported that U.S. financial regulators had fined Bank of America $150 million.
Bank of America Bunkum
According to the New York Times, America’s second-largest bank has been double-charging overdraft fees, withholding card perks, and opening unauthorized accounts.
Banking regulators, the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB) fined the bank $150 million for what they labeled “junk fees.”
It reported that some customers paid overdraft fees multiple times for the same transaction. Furthermore, the bank secretly opened accounts in customers’ names without their knowledge or consent.
Get the lowdown on the 2023 U.S. banking crisis: 2023 US Banking Crisis Explained: Causes, Impact, and Solutions
Opening fake accounts to meet sales targets is a widespread practice. Wells Fargo underwent years of investigations by federal and state authorities, resulting in billions of dollars in penalties for fake accounts.
The bank was also found to be shirking sign-up bonuses it promised customers for opening new card accounts.
Following the action, Bank of America will repay $80 million to customers affected by its malpractices. Director of the consumer bureau, Rohit Chopra, commented:
“These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.”
Bank of America was in the spotlight earlier this month when reports emerged that it had over $100 billion in bond market paper losses.
Fed Stress Test Inadequate
The bank, which manages $2.5 trillion in total assets, could be forced to sell these bonds at a loss if depositors want their money. This could lead to a situation mirroring that at Silicon Valley Bank, which collapsed in March.
While BoA’s paper losses were larger, other major U.S. banks were facing the same problem. JPMorgan has $37 billion in paper losses and Wells Fargo has $42 billion. The research states that Citi and Morgan Stanley have lost a combined total of $34 billion.
In late June, the U.S. central bank stress-tested some of the country’s largest banks for recession resistance
According to the Washington Post, the Federal Reserve passed them all but did not assess the banks’ ability to withstand real-world challenges.
Furthermore, the Fed’s banking bailout fund (Bank Term Funding Program) is at an all-time high of over $100 billion. In March, it set up the fund to enable embattled lenders to borrow more money.
