The Senate Banking Committee on Wednesday approved a bill to empower regulators to seize compensation from executives at failed banks, the first major legislative response to the banking crisis that shook the financial system this spring.
The bill would authorize the Federal Deposit Insurance Corp. to strip bonuses and stock sale proceeds paid to executives of failed banks from the two years before their institutions’ collapses. It would also allow the banking regulator to impose penalties of up to $3 million for reckless mismanagement.
An earlier bill led by another bipartisan duo on the banking panel, Sens. Elizabeth Warren (D-Mass.) and J.D. Vance (R-Ohio), would empower regulators to issue stiffer penalties against executives. But Warren on Wednesday backed the Brown-Scott version and called it a reasonable compromise.
The Biden administration in March called on Congress to beef up regulators’ ability to hold bank executives personally accountable for the failures of their institutions, after the collapse of Silicon Valley Bank destabilized the banking sector and claimed two other lenders, Signature Bank and First Republic.
Federal investigators probing Silicon Valley Bank’s implosion reportedly are looking into $3.6 million in stock sales by chief executive Greg Becker in the days before its collapse.
Natalia Renta, senior policy counsel at the liberal coalition Americans for Financial Reform, called the bill’s advancement “an important step the public has been craving.”
“Though it’s a sea change that some Republicans are finally joining forces with Democrats to advance financial reform, this year’s banking crisis reminds us that there is a lot more to do,” she said in an email.
Banking industry groups, meanwhile, for the most part have remained publicly silent on the proposal.