A group of lawmakers recently introduced legislation they noted enables federal regulators to recoup all or part of bank executive compensation received in the event of a bank failure.
U.S. Sens. Elizabeth Warren (D-MA) and Catherine Cortez Masto (D-NV), members of the Senate Banking, Housing and Urban Affairs Committee, recently joined U.S. Sens. Josh Hawley (R-MO) and Mike Braun (R-IN) in detailing the Failed Bank Executives Clawback Act.
The bank executive compensation recoup would target all or part of the compensation received by failed bank executives in the five-year period preceding the failure.
Currently, the Federal Deposit Insurance Corporation (FDIC) has limited ability to recoup executive compensation in the event of a bank failure.
“The President called on Congress to pass a new law to hold failed bank CEOs accountable and give the financial cops on the beat additional authority to clawback lavish pay and bonuses when executives explode their bank – and this bipartisan bill answers that imperative,” Warren said. “Americans are sick and tired of fat cat bankers paying themselves handsomely while risking other people’s hard-earned money. It’s time for Congress to step up and strengthen the law so bank executives bear the cost of failure, not line their pockets and walk away scot-free.”
According to the legislation, provisions include extending clawback 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 only those resolved under the FDIC’s Orderly Liquidation Authority and ensuring should an insured depository institution affiliated with a bank holding company fail, investors in that holding company bear the losses of the insured depository institution.