Failed Bank Executives Clawback Act

II 118TH CONGRESS 1ST SESSION S. 1790 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, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 1, 2023 Ms. WARREN (for herself, Mr. HAWLEY, Ms. CORTEZ MASTO, Mr. BRAUN, Mr. VANCE, Mr. MENENDEZ, Mr. WARNER, Mr. VAN HOLLEN, Ms. SMITH, Mrs. BRITT, Mr. CRAMER, Mr. WARNOCK, and Mr. FETTERMAN) 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, 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 ‘‘Failed Bank Execu- 4 tives Clawback Act’’. 5 VerDate Sep 11 2014 00:58 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1790.IS S1790 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1790 IS SEC. 2. CLAWBACK. 1 Section 8(b) of the Federal Deposit Insurance Act 2 (12 U.S.C. 1818(b)) is amended by inserting after para- 3 graph (8) the following: 4 ‘‘(9) CLAWBACK.— 5 ‘‘(A) DEFINITIONS.—In this paragraph: 6 ‘‘(i) COVERED COMPENSATION.—The 7 term ‘covered compensation’ means— 8 ‘‘(I) salary; 9 ‘‘(II) bonuses; 10 ‘‘(III) any compensation that is 11 granted, earned, or vested based whol- 12 ly or in part upon the attainment of 13 any financial reporting measure or 14 other performance metric; 15 ‘‘(IV) equity-based compensation; 16 ‘‘(V) time- or service-based 17 awards; 18 ‘‘(VI) awards based on non- 19 financial metrics; and 20 ‘‘(VII) any profits realized from 21 the buying or selling of securities. 22 ‘‘(ii) COVERED PARTY.— 23 ‘‘(I) IN GENERAL.—The term 24 ‘covered party’ means an entity de- 25 scribed in subclause (II) with respect 26 VerDate Sep 11 2014 00:58 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1790.IS S1790 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1790 IS to an insured depository institution 1 that caused more than a minimal fi- 2 nancial loss to, or a significant ad- 3 verse effect on, the insured depository 4 institution. 5 ‘‘(II) ENTITIES DESCRIBED.—An 6 entity described in this subclause is 7 any of the following: 8 ‘‘(aa) Any director, officer, 9 or controlling stockholder (other 10 than a bank holding company or 11 savings and loan holding com- 12 pany) of, or agent for, an insured 13 depository institution. 14 ‘‘(bb) Any other person who 15 has filed or is required to file a 16 change-in-control notice with the 17 appropriate Federal banking 18 agency under section 7(j). 19 ‘‘(cc) Any shareholder (other 20 than a bank holding company or 21 savings and loan holding com- 22 pany), joint venture partner, and 23 any other person as determined 24 by the appropriate Federal bank- 25 VerDate Sep 11 2014 00:58 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1790.IS S1790 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1790 IS ing agency (by regulation or 1 case-by-case) who participates in 2 the conduct of the affairs of an 3 insured depository institution. 4 ‘‘(B) CLAWBACK.— 5 ‘‘(i) LIABILITY OF COVERED PARTY.— 6 A covered party with respect to an insured 7 depository institution with total assets 8 more than $10,000,000,000 is liable to the 9 Corporation for any covered compensation 10 clawed back under clause (ii). 11 ‘‘(ii) REQUIRED CLAWBACKS.—In the 12 case of insolvency, resolution, or the ap- 13 pointment of the Corporation as receiver of 14 any insured depository institution with 15 total assets more than $10,000,000,000, 16 the Corporation shall claw back all or part 17 of the covered compensation received by 18 any covered party with respect to the in- 19 sured depository institution during the pre- 20 ceding 3 years. 21 ‘‘(iii) DEPOSIT.—Any covered com- 22 pensation clawed back under this subpara- 23 graph shall be deposited into the Deposit 24 Insurance Fund.’’. 25 VerDate Sep 11 2014 00:58 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1790.IS S1790 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1790 IS SEC. 3. ORDERLY LIQUIDATION OF COVERED FINANCIAL 1 COMPANIES. 2 Section 204(a)(3) of the Dodd-Frank Wall Street Re- 3 form and Consumer Protection Act (12 U.S.C. 4 5384(a)(3)) is amended by striking ‘‘the financial com- 5 pany’’ and inserting ‘‘of a financial company for which the 6 Corporation is appointed receiver, regardless of the proc- 7 ess by which the Corporation is appointed,’’. 8 Æ VerDate Sep 11 2014 00:58 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S1790.IS S1790 kjohnson on DSK79L0C42PROD with BILLS