Bank Management Accountability Act

II 118TH CONGRESS 1ST SESSION S. 1181 To amend the Federal Deposit Insurance Act to improve financial stability, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 18, 2023 Mr. REED (for himself and Mr. GRASSLEY) introduced the following bill; which was read twice and referred to the Committee on Banking, Hous- ing, and Urban Affairs A BILL To amend the Federal Deposit Insurance Act to improve financial stability, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Bank Management Ac- 4 countability Act’’. 5 SEC. 2. SYSTEMIC RISK DETERMINATION. 6 (a) IN GENERAL.—Section 13(c)(4)(G) of the Fed- 7 eral Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)) is 8 amended by adding at the end the following: 9 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 1181 IS ‘‘(vi) RECOUPMENT OF COMPENSA- 1 TION FROM SENIOR EXECUTIVES AND DI- 2 RECTORS.— 3 ‘‘(I) IN GENERAL.—The Corpora- 4 tion, as receiver or conservator of an 5 insured depository institution under 6 clause (i), may recover from any cur- 7 rent or former senior executive or di- 8 rector of the insured depository insti- 9 tution, or of a covered affiliate with 10 respect to the insured depository insti- 11 tution, who is substantially respon- 12 sible for the failed condition of the in- 13 sured depository institution, any com- 14 pensation received during the 2-year 15 period preceding the date on which 16 the Corporation was appointed as the 17 receiver or conservator of the insured 18 depository institution, except that, in 19 the case of fraud, no time limit shall 20 apply. 21 ‘‘(II) COST CONSIDERATIONS.— 22 In seeking to recover any compensa- 23 tion under subclause (I), the Corpora- 24 tion shall weigh the financial and de- 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •S 1181 IS terrent benefits of that recovery 1 against the cost of executing the re- 2 covery. 3 ‘‘(III) PERSONAL LIABILITY.— 4 Any liability insurance policy for a 5 senior executive or director described 6 in subclause (I) shall exclude from 7 coverage any liability under this 8 clause. 9 ‘‘(vii) PROHIBITION AUTHORITY.— 10 ‘‘(I) IN GENERAL.—The Corpora- 11 tion may take any action authorized 12 by subclause (II), if the Corporation 13 determines that— 14 ‘‘(aa) a senior executive or a 15 director of an insured depository 16 institution with respect to which 17 the Corporation has taken action 18 or provided assistance under 19 clause (i), or of a covered affiliate 20 with respect to such an insured 21 depository institution, before the 22 appointment of the Corporation 23 as receiver or conservator, has, 24 directly or indirectly— 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •S 1181 IS ‘‘(AA) violated any law 1 or regulation; 2 ‘‘(BB) violated any 3 cease-and-desist order that 4 has become final; 5 ‘‘(CC) violated any con- 6 dition imposed in writing by 7 a Federal agency in connec- 8 tion with any action on any 9 application, notice, or re- 10 quest by the insured deposi- 11 tory institution or covered 12 affiliate (as applicable) or 13 the senior executive or direc- 14 tor (as applicable); 15 ‘‘(DD) violated any 16 written agreement between 17 the insured depository insti- 18 tution or covered affiliate 19 (as applicable) and the Fed- 20 eral agency described in 21 subitem (CC); 22 ‘‘(EE) engaged or par- 23 ticipated in any unsafe or 24 unsound practice; or 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •S 1181 IS ‘‘(FF) committed or en- 1 gaged in any act, omission, 2 or practice that constitutes a 3 breach of the fiduciary duty 4 of that senior executive or 5 director; and 6 ‘‘(bb) by reason of the viola- 7 tion, practice, or breach de- 8 scribed in any subitem of item 9 (aa), that senior executive or di- 10 rector has received financial gain 11 or other benefit, and that viola- 12 tion, practice, or breach contrib- 13 uted to the failure of the insured 14 depository institution. 15 ‘‘(II) AUTHORIZED ACTIONS.— 16 The Corporation may serve upon a 17 senior executive or director with re- 18 spect to whom the Corporation has 19 made a determination under subclause 20 (I) a written notice of the intention of 21 the Corporation to prohibit any fur- 22 ther participation by that individual, 23 in any manner, in the conduct of the 24 affairs of any financial company for a 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •S 1181 IS period of time determined by the Cor- 1 poration to be commensurate with 2 that violation, practice, or breach, ex- 3 cept that such period shall be not less 4 than 2 years. 5 ‘‘(viii) DEFINITIONS.—In this sub- 6 paragraph: 7 ‘‘(I) COMPENSATION.—The term 8 ‘compensation’ means any direct or 9 indirect financial remuneration re- 10 ceived from an insured depository in- 11 stitution, or from a covered affiliate 12 with respect to an insured depository 13 institution, including salary, bonuses, 14 incentives, benefits, severance pay, de- 15 ferred compensation, golden parachute 16 benefits, benefits derived from an em- 17 ployment contract or other compensa- 18 tion or benefit arrangement, per- 19 quisites, stock option plans, post-em- 20 ployment benefits, profits realized 21 from a sale of securities in the insured 22 depository institution or the covered 23 affiliate (as applicable), or any cash or 24 noncash payments or benefits granted 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •S 1181 IS to or for the benefit of a senior execu- 1 tive or director. 2 ‘‘(II) COVERED AFFILIATE.—The 3 term ‘covered affiliate’ means, with 4 respect to an insured depository insti- 5 tution, any— 6 ‘‘(aa) bank holding company 7 (as defined in section 2(a) of the 8 Bank Holding Company Act of 9 1956 (12 U.S.C. 1841(a))) that 10 controls the insured depository 11 institution; 12 ‘‘(bb) savings and loan hold- 13 ing company (as defined in sec- 14 tion 10(a) of the Home Owners’ 15 Loan Act (12 U.S.C. 1467a(a))) 16 that directly or indirectly controls 17 the insured depository institu- 18 tion; 19 ‘‘(cc) subsidiary of the in- 20 sured depository institution; or 21 ‘‘(dd) affiliate (as defined in 22 section 2 of the Bank Holding 23 Company Act of 1956 (12 U.S.C. 24 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •S 1181 IS 1841(k))) of the insured deposi- 1 tory institution. 2 ‘‘(III) DIRECTOR.—The term ‘di- 3 rector’ means a member of the board 4 of directors of a company, or of a 5 board or committee performing a 6 similar function to a board of direc- 7 tors, who has authority to vote on 8 matters before the board or com- 9 mittee. 10 ‘‘(IV) FINANCIAL COMPANY.— 11 The term ‘financial company’ has the 12 meaning given the term in section 13 201(a) of the Dodd-Frank Wall Street 14 Reform and Consumer Protection Act 15 (12 U.S.C. 5381(a)). 16 ‘‘(V) SENIOR EXECUTIVE.—The 17 term ‘senior executive’— 18 ‘‘(aa) means any individual 19 who participates or has authority 20 to participate (other than in the 21 capacity of a director) in major 22 policymaking functions of a com- 23 pany, regardless of whether the 24 individual has an official title or 25 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •S 1181 IS the title of the individual des- 1 ignates the individual as an as- 2 sistant; and 3 ‘‘(bb) includes the chairman 4 of the board, the president, any 5 vice president, the secretary, the 6 treasurer or chief financial offi- 7 cer, the general partner, and any 8 manager of a company, unless 9 the individual— 10 ‘‘(AA) is excluded, by 11 resolution of the board of di- 12 rectors, the bylaws, the op- 13 erating agreement, or the 14 partnership agreement of 15 the company, from partici- 16 pation (other than in the ca- 17 pacity of a director) in 18 major policymaking func- 19 tions of the company; and 20 ‘‘(BB) does not actually 21 participate in major policy- 22 making functions of the 23 company.’’. 24 VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •S 1181 IS (b) REGULATIONS.—The Federal Deposit Insurance 1 Corporation shall promulgate regulations to administer 2 and carry out this section, in a manner that is not less 3 stringent than the manner set forth in section 380.7 of 4 title 12, Code of Federal Regulations (as in effect on the 5 date of enactment of this Act). 6 SEC. 3. ORDERLY LIQUIDATION AUTHORITY. 7 Title II of the Dodd-Frank Wall Street Reform and 8 Consumer Protection Act (12 U.S.C. 5381 et seq.) is 9 amended— 10 (1) in section 210(s) (12 U.S.C. 5390(s)), by 11 adding at the end the following: 12 ‘‘(4) PERSONAL LIABILITY.—Any liability insur- 13 ance policy for a senior executive or director de- 14 scribed in paragraph (1) shall exclude from coverage 15 any liability under this subsection.’’; and 16 (2) in section 213(b) (12 U.S.C. 5393(b))— 17 (A) in paragraph (1)(C), by inserting 18 ‘‘and’’ at the end; 19 (B) in paragraph (2), by striking ‘‘; and’’ 20 and inserting a period; and 21 (C) by striking paragraph (3). 22 Æ VerDate Sep 11 2014 05:49 Apr 20, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S1181.IS S1181 pbinns on DSKJLVW7X2PROD with $$_JOB