Failed Bank Executives Accountability and Consequences Act

I 118TH CONGRESS 1ST SESSION H. R. 4208 To provide Federal financial regulators with clawback authority over executive compensation and additional industry prohibition and civil money penalty authority with respect to executives whose negligence caused financial loss to the applicable financial institution, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 20, 2023 Ms. WATERS (for herself, Ms. VELA´ZQUEZ, Mr. SHERMAN, Mr. DAVID SCOTT of Georgia, Mr. CLEAVER, Mrs. BEATTY, Mr. VARGAS, Mr. HORSFORD, Ms. TLAIB, Ms. GARCIA of Texas, and Mr. GREEN of Texas) introduced the following bill; which was referred to the Committee on Financial Serv- ices A BILL To provide Federal financial regulators with clawback au- thority over executive compensation and additional indus- try prohibition and civil money penalty authority with respect to executives whose negligence caused financial loss to the applicable financial institution, 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 Accountability and Consequences Act’’. 5 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 4208 IH SEC. 2. SENSE OF CONGRESS. 1 It is the sense of the Congress that— 2 (1) financial regulators and law enforcement 3 agencies should fully exercise the maximum extent of 4 their authorities to investigate and use available en- 5 forcement tools to hold executive officers and board 6 members at Silicon Valley Bank, Signature Bank, 7 First Republic Bank, and any other bank that fails 8 fully accountable for any misconduct in which they 9 are found to have engaged; and 10 (2) the Board of Governors of the Federal Re- 11 serve System, the Office of the Comptroller of the 12 Currency, the Board of Directors of the Federal De- 13 posit Insurance Corporation, the National Credit 14 Union Administration Board, the Securities and Ex- 15 change Commission, the Federal Housing Finance 16 Agency should jointly finalize the regulations or 17 guidelines required under section 956 of the ‘‘Inves- 18 tor Protection and Securities Reform Act of 2010’’, 19 and those regulations or guidelines should include 20 robust clawback requirements. 21 SEC. 3. CLAWBACK AUTHORITY. 22 (a) IN GENERAL.—Section 8 of the Federal Deposit 23 Insurance Act (12 U.S.C. 1818) is amended by adding at 24 the end the following: 25 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 4208 IH ‘‘(x) RECOUPMENT OF COMPENSATION FROM EXEC- 1 UTIVE OFFICERS AND DIRECTORS.— 2 ‘‘(1) IN GENERAL.—During any period in which 3 the Corporation is acting as conservator or receiver 4 for an insured depository institution, the Corpora- 5 tion may recover, from any current or former execu- 6 tive officer or director of such insured depository in- 7 stitution whose negligence caused financial loss to 8 such insured depository institution, any compensa- 9 tion received during the 2-year period preceding the 10 date on which the Corporation was appointed as the 11 conservator or receiver of the insured depository in- 12 stitution, except that, in the case of fraud, no time 13 limit shall apply. 14 ‘‘(2) RULEMAKING.—The Corporation shall pro- 15 mulgate regulations to implement the requirements 16 of this subsection, including defining the term ‘com- 17 pensation’ to mean any financial remuneration, in- 18 cluding salary, bonuses, incentives, benefits, sever- 19 ance, deferred compensation, or golden parachute 20 benefits, and any profits realized from the sale of 21 the securities of the insured depository institution 22 (or the securities of an affiliate of the insured depos- 23 itory institution).’’. 24 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 4208 IH (b) CLAWBACK AUTHORITY RELATING TO ORDERLY 1 LIQUIDATION AUTHORITY.—Section 210(s)(1) of the 2 Dodd-Frank Wall Street Reform and Consumer Protec- 3 tion Act is amended as follows: 4 ‘‘(1) IN GENERAL.—The Corporation, as re- 5 ceiver of a covered financial company, may recover 6 from any current or former executive officer or di- 7 rector whose negligence caused financial loss to the 8 covered financial company any compensation re- 9 ceived during the 2-year period preceding the date 10 on which the Corporation was appointed as the re- 11 ceiver of the covered financial company, except that, 12 in the case of fraud, no time limit shall apply.’’. 13 SEC. 4. REMOVAL AND PROHIBITION AUTHORITY IN THE 14 CASE OF INSTITUTION FAILURE. 15 (a) IN GENERAL.—Section 8(e) of the Federal De- 16 posit Insurance Act (12 U.S.C. 1818(e)) is amended-— 17 (1) by redesignating paragraphs (3), (4), (5), 18 (6), and (7) as paragraphs (4), (5), (6), (7), and 19 (8), respectively; and 20 (2) by inserting after paragraph (2) the fol- 21 lowing: 22 ‘‘(3) SUSPENSION, REMOVAL, AND PROHIBITION 23 FROM PARTICIPATION ORDERS IN THE CASE OF IN- 24 STITUTION FAILURE.—Whenever the appropriate 25 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 4208 IH Federal banking agency determines that an institu- 1 tion-affiliated party has negligently caused financial 2 loss to any insured depository institution that has 3 failed, the appropriate Federal banking agency for 4 the depository institution may serve upon such party 5 a written notice of the agency’s intention to prohibit 6 any further participation by such party, in any man- 7 ner, in the conduct of the affairs of any insured de- 8 pository institution.’’. 9 (b) CONFORMING AMENDMENT.—The Federal De- 10 posit Insurance Act (12 U.S.C. 1811 et seq.) is amend- 11 ed— 12 (1) in section 8— 13 (A) in subsection (e)— 14 (i) in paragraph (3), by striking 15 ‘‘under paragraph (1) or (2)’’ each place it 16 occurs and inserting ‘‘under paragraphs 17 (1), (2), or (3)’’; and 18 (ii) in paragraph (7), as so redesig- 19 nated, by striking ‘‘paragraph (7)(A)’’ and 20 inserting ‘‘paragraph (8)(A)’’; 21 (B) in subsection (f), by striking ‘‘sub- 22 section (e)(3)’’ and inserting ‘‘subsection 23 (e)(4)’’; 24 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 4208 IH (C) in subsection (g)(1)(D)(ii), by striking 1 ‘‘paragraph (1), (2), or (3) of subsection (e)’’ 2 and inserting ‘‘paragraph (1), (2), or (4) of 3 subsection (e)’’; and 4 (D) in subsection (j), by striking ‘‘sub- 5 section (e)(6)’’ and inserting ‘‘subsection 6 (e)(7)’’; and 7 (2) in section 10(k)(6)— 8 (A) in subparagraph (A)(i), by striking 9 ‘‘section 8(e)(4) for written notices or orders 10 under paragraph (1) or (2) of section 8(e)’’ and 11 inserting ‘‘section 8(e)(5) for written notices or 12 orders under paragraph (1), (2), or (3) of sec- 13 tion 8(e)’’; and 14 (B) in subparagraph (B), by striking 15 ‘‘paragraphs (6) and (7) of section 8(e)’’ and 16 inserting ‘‘paragraphs (7) and (8) of section 17 8(e)’’. 18 SEC. 5. FINES FOR FAILED BANK EXECUTIVES. 19 (a) IN GENERAL.—Section 8(i)(2) of the Federal De- 20 posit Insurance Act (12 U.S.C. 1818(i)(2)) is amended 21 by— 22 (1) redesignating subparagraphs (D), (E), (F), 23 (G), (H), (I), (J), and (K) as paragraphs (E), (F), 24 (G), (H), (I), (J), (K), and (L), respectively; and: 25 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 4208 IH (2) by inserting after subparagraph (C), the fol- 1 lowing: 2 ‘‘(D) FINES FOR CONTRIBUTING TO INSTI- 3 TUTION FAILURE.— 4 ‘‘(i) FIRST TIER.—Notwithstanding 5 subparagraphs (A), (B), and (C), any exec- 6 utive officer or director who has neg- 7 ligently caused financial loss to any in- 8 sured depository institution that has failed 9 shall forfeit and pay a civil penalty of not 10 more than $25,000 for each day during 11 which such conduct occurred. 12 ‘‘(ii) SECOND TIER.—Notwithstanding 13 subparagraphs (A), (B), and (C), any exec- 14 utive officer or director who knowingly or 15 recklessly caused financial loss to any in- 16 sured depository institution that has failed 17 shall forfeit and pay a civil penalty in an 18 amount not to exceed the applicable max- 19 imum amount determined under subpara- 20 graph (E) for each day during which such 21 conduct occurred.’’. 22 (b) CONFORMING AMENDMENTS.—Section 8(i)(2) of 23 the Federal Deposit Insurance Act (12 U.S.C. 1818(i)(2)), 24 as amended by subsection (a) is further amended— 25 VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 4208 IH (1) in subparagraph (E), by striking ‘‘to sub- 1 paragraph (C)’’ and inserting ‘‘to subparagraph (C) 2 or (D)’’; 3 (2) in subparagraph (F)— 4 (A) by striking ‘‘under subparagraph (A), 5 (B), or (C)’’ and inserting ‘‘under subpara- 6 graph (A), (B), (C), or (D)’’; and 7 (B) by striking ‘‘subparagraph (H)’’ and 8 inserting ‘‘subparagraph (I)’’; 9 (3) in subparagraph (G), by striking ‘‘under 10 subparagraph (A), (B), or (C)’’ and inserting ‘‘under 11 subparagraph (A), (B), (C), or (D)’’; and 12 (4) in subparagraph (H), by striking ‘‘under 13 subparagraph (A), (B), or (C)’’ and inserting ‘‘under 14 subparagraph (A), (B), (C), or (D)’’. 15 SEC. 6. RULE OF CONSTRUCTION. 16 This Act and the amendments made by this Act may 17 not be construed to limit the enforcement authorities that 18 financial regulators and law enforcement agencies had, 19 prior to the date of enactment of this Act, to hold execu- 20 tive officers and board members of insured depository in- 21 stitutions and covered financial companies accountable for 22 any misconduct in which they are found to have engaged. 23 Æ VerDate Sep 11 2014 22:02 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H4208.IH H4208 kjohnson on DSK79L0C42PROD with BILLS