U.S. Sen. Mark R. Warner (D-VA) has joined a group of colleagues to introduce legislation that would authorize efforts to recoup executive pay when a bank failure occurs.
Bill proponents noted the Failed Bank Executives Clawback Act would, among other provisions, require the Federal Deposit Insurance Corporation (FDIC) to regain up to three years of compensation received by bank executives, board members, controlling shareholders and other key decision makers.
Currently, the FDIC has limited ability to recoup executive compensation in the event of a bank failure.
“Executives of failed banks shouldn’t profit from their mismanagement,” Warner, a member of the Senate Banking Committee, said. “This bipartisan legislation would allow regulators to hold managers financially accountable for running a bank into the ground.”
Other bill provisions include directing funds clawed back from executives into the FDIC’s Deposit Insurance Fund; extending claw back authorities established by Section 204(a)(3) of the Dodd-Frank Wall Street Reform and Consumer Protection Act to apply to any bank entered into FDIC receivership – not solely those resolved under the FDIC’s Orderly Liquidation Authority; and applying the measure to directors, officers, controlling shareholders, and other high-level persons involved in decision making of banks with $10 billion or more in assets who caused more than a minimal financial loss to or had a significant adverse impact on the bank.