New York - Bank of America hired Davis Polk & Wardwell to conduct an internal review of a $292m (R3.5bn) charge-off in the fourth quarter, according to a person familiar with the matter.
The law firm has been interviewing staff at the bank and is keeping the board of directors informed of its progress, the person said on Wednesday, asking not to be identified because the matter is private.
The charge was tied to the embattled Steinhoff International [JSE:SNH], a person said in January when it was announced. The Wall Street Journal reported the hiring of the law firm earlier on Wednesday.
“One of the reasons we have record-low credit losses is because we take the time to analyse what happened when things don’t go as planned and learn from it,” the bank said in an emailed statement on Wednesday. “It’s the responsible thing for a financial institution to do.”
Bank of America is among US lenders that got stung by losses tied to Steinhoff, whose shares plunged after it reported accounting irregularities. CEO Brian Moynihan acknowledged on a conference call last month, without naming the client, that the incident in the fourth quarter was a “wake-up call” and the bank would figure out how to steer clear of similar events.
“What are the lessons learned and what did we do right or wrong in that and how do we avoid that in the future?” he said on the call. “The team has spent significant time doing that. We weren’t happy with it from the top of the house through to the actual people who were involved in it.”
Other banks including Natixis and Commerzbank have been seeking to cut exposure to the retailer, whose shares slumped 94% last year. Bank of America was stung by a margin loan that used Steinhoff’s stock as collateral, the person said in January.
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