What This Bill Does
This bill clarifies that the Federal Deposit Insurance Corporation and other federal regulators can recover certain payments made to bank executives when a bank fails or becomes insolvent. The bill is called the "Failed Bank Executives Clawback Act" and allows regulators to take back compensation from executives responsible for the bank's problems.
Who It Affects
Bank executives and institution-affiliated parties (people working for banks who made decisions affecting the bank), the Federal Deposit Insurance Corporation, federal banking regulators, banks that fail or become insolvent, and the general Treasury fund.
Key Provisions
• The Federal Deposit Insurance Corporation must claw back all or part of covered compensation paid to executives during the previous 5 years when a bank becomes insolvent or is resolved, to prevent unfair enrichment and ensure executives bear losses matching their responsibility (Sec. 2(B)(ii))
• Covered compensation includes salary, bonuses, performance-based pay, stock-based pay, service awards, non-financial awards, and profits from buying or selling securities (Sec. 2(A))
• Money clawed back must be deposited into the Deposit Insurance Fund or the U.S. Treasury's general fund (Sec. 2(B)(iii))
• When a bank holding company's bank is resolved, the creditors and shareholders of the bank holding company must bear the losses of the failed bank (Sec. 4)
Important Definitions
"Covered compensation" means salary, bonuses, performance-based compensation, stock-based compensation, time or service awards, non-financial awards, and profits from securities transactions.
Effective Date
Not specified in bill text
II
118TH CONGRESS
1ST SESSION
S. 1045
To amend the Federal Deposit Insurance Act to clarify that the Federal
Deposit Insurance Corporation and appropriate Federal regulators have
the authority to claw back certain compensation paid to executives.
IN THE SENATE OF THE UNITED STATES
MARCH 29, 2023
Ms. WARREN (for herself, Mr. HAWLEY, Ms. CORTEZ MASTO, and Mr.
BRAUN) introduced the following bill; which was read twice and referred
to the Committee on Banking, Housing, and Urban Affairs
A BILL
To amend the Federal Deposit Insurance Act to clarify that
the Federal Deposit Insurance Corporation and appro-
priate Federal regulators have the authority to claw back
certain compensation paid to executives.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Failed Bank Execu-
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tives Clawback Act’’.
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•S 1045 IS
SEC. 2. CLAWBACK.
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Section 8(b) of the Federal Deposit Insurance Act
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(12 U.S.C. 1818(b)) is amended by inserting after para-
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graph (8) the following:
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‘‘(9) CLAWBACK.—
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‘‘(A) DEFINITION.—In this paragraph, the
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term ‘covered compensation’ means—
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‘‘(i) salary;
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‘‘(ii) bonuses;
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‘‘(iii) any compensation that is grant-
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ed, earned, or vested based wholly or in
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part upon the attainment of any financial
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reporting measure or other performance
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metric;
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‘‘(iv) equity-based compensation;
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‘‘(v) time- or service-based awards;
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‘‘(vi) awards based on nonfinancial
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metrics; and
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‘‘(vii) any profits realized from the
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buying or selling of securities.
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‘‘(B) CLAWBACK.—
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‘‘(i) LIABILITY
OF
INSTITUTION-AF-
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FILIATED PARTY.—An institution-affiliated
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party that is responsible for the condition
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of the insured depository institution is lia-
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ble to the Corporation for any covered
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•S 1045 IS
compensation clawed back under clause
1
(ii).
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‘‘(ii) REQUIRED CLAWBACKS.—In the
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case of insolvency or resolution of any in-
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sured depository institution, the Corpora-
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tion shall claw back all or part of the cov-
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ered compensation received by an institu-
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tion-affiliated party during the preceding 5
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years as is necessary to prevent unjust en-
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richment and assure that the party bears
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losses consistent with the responsibility of
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the party.
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‘‘(iii) DEPOSIT.—Any covered com-
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pensation clawed back under this subpara-
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graph shall be deposited into the Deposit
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Insurance Fund or into the general fund of
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the Treasury.’’.
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SEC. 3. ORDERLY LIQUIDATION OF COVERED FINANCIAL
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COMPANIES.
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Section 204(a)(3) of the Dodd-Frank Wall Street Re-
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form
and
Consumer
Protection
Act
(12
U.S.C.
21
5384(a)(3)) is amended by striking ‘‘the financial com-
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pany’’ and inserting ‘‘of a financial company for which the
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Corporation is appointed receiver, regardless of the proc-
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ess by which the Corporation is appointed,’’.
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•S 1045 IS
SEC. 4. RESOLVED INSURED DEPOSITORY INSTITUTIONS.
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If an insured depository institution is resolved by the
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Federal Deposit Insurance Corporation, the creditors and
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shareholders of any corresponding depository institution
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holding company shall bear the losses of the insured de-
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pository institution.
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Æ
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