WASHINGTON – In an effort to improve accountability at big banks and ensure managers of failed banks don’t profit from their mismanagement and negligence, the U.S. Senate Committee on Banking, Housing, and Urban Affairs last week voted 21-2 to advance the bipartisan Recovering Executive Compensation from Unaccountable Practices Act to the full Senate.
This legislation, supported by U.S. Sen. Jack Reed, D-R.I., would give federal regulators power to claw back compensation for executives of failed banks, institute penalties for misconduct and direct banks to beef up corporate governance. Under the RECOUP Act, bank CEOs and top executives would be subject to fines and penalties if they were found to have ignored warnings and enforcement actions from regulators.
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“This bipartisan bill should make bank executives think twice before engaging in risky activities,” Reed, a senior member of the banking committee, said in a statement. “It would help ensure those most responsible for bank failures are the ones who help pay to clean them up.”
The RECOUP Act was considered by the banking committee in the wake of the failures of Silicon Valley Bank and First Republic Bank in California and Signature Bank in New York, each with assets exceeding $100 billion. The CEO of Silicon Valley Bank received $10 million in compensation in 2022 and sold $3.5 million of company stock in the days before the failure. The CEO of Signature Bank received $8.7 million in compensation in 2022 and sold millions of dollars’ worth of company stock before the failure. The CEO of First Republic Bank sold $4.5 million in two transactions this year, before the stock price sank and the bank failed.
