Bank of America Corp. said it is among the companies that regulators have been investigating for possible manipulation of interbank lending rates, in another reminder that the Charlotte, N.C.-based financial services firm remains at high risk of litigation.
Bank of America said it’s received subpoenas and information requests from government authorities including the U.S. Department of Justice (DOJ), the U.S. Commodity Futures Trading Commission and the United Kingdom Financial Services Authority, according to a regulatory filing Thursday. Questions involved submissions made by banks in connection with the setting of London interbank offered rates (LIBOR), European and other interbank offered rates. Meanwhile, class action and individual lawsuits have hit the U.S. federal courts alleging, among other things, that Bank of America colluded to manipulate the setting of LIBOR. Bank of America also said it’s been in discussion with regulators about its identity theft protection services, including whether appropriate oversight existed.
The company continues to be embroiled in controversy. For example, Bank of America is involved in public hearings that the New York State Department of Financial Services began conducting this May to review whether rates for force-placed insurance are appropriate or excessive, as well as to examine the relationships between insurers, banks, mortgage servicers and insurance agents and brokers. When the DOJ, the Department of Housing and Urban Development and 49 state attorneys general on February 9, 2012 announced their $25 billion agreement with the nation’s five largest mortgage servicers to address foreclosure abuses, Bank of America had to commit to paying $11.8 billion (with roughly $8 billion in assistance to borrowers alone — the largest penalty among banks included in the settlement.) As the lawsuits continue piling up, it is not clear what measures the company has taken to prevent these problems from recurring in the future.
To be sure, Bank of America said in a website statement last updated on April 17 that its commitment to corporate social responsibility is a strategic part of doing business globally. Among specific examples to highlight its commitment, the bank said in a July 2011 report of its activities in 2010 that it had loaned more than $92 billion to small and medium-sized businesses that year, and this was $10 billion more than in 2009.
Past actions exemplify an undercurrent of governance weakness. For example, the bank announced on October 21, 2009 that its CEO between April 2001 and the crisis, Kenneth Lewis, had elected to forego his annual salary for the 2009 fiscal year. While that sounds good, this seemingly positive action effectively gets watered down. Despite his firm’s need to take a bailout from the government in October 2008, Lewis continued to benefit from the board’s past generosities. Upon his retirement on December 31, 2009, he left receiving more than $83.7 million in benefits. In a more recent example of potential governance risk, Charles O. Holliday, Jr., who has been the board’s chairman since April 2010 and is the former chairman and CEO DuPont de Nemours and Co., has no direct experience in banking.
In part due to such issues, Bank of America’s financial statements reflect an AGR score of 22, indicating higher accounting and governance risk than 78% of companies. The company is rated D on its corporate governance overall.
Region: North America
Market Cap: $ 78,238.8mm (Large Cap)
ESG Rating: D
AGR: Aggressive (22)