Summary
Gives financial regulators the power to take back pay from and penalize bank executives whose carelessness causes their bank to fail.
What problem does this solve?
When banks fail due to bad decisions, the executives in charge often keep their large salaries and bonuses without facing personal financial consequences. This bill allows regulators to recover compensation from those executives, ban them from the industry, and issue large fines to discourage such behavior.
What does this bill do?
Reference
Text:
Section:
Sec. 3(a)
Header:
Recoupment of compensation from executive officers and directors
Allows regulators to 'claw back' executive pay
Permits the FDIC to recover any compensation received by a negligent executive or director within the two years leading up to their bank's failure.
Creates new fines for executives of failed banks
Establishes a civil penalty of up to $25,000 per day for any executive or director whose negligence causes their bank to fail.
Reference
Text:
Section:
Sec. 4(a)
Header:
Suspension, removal, and prohibition from participation orders in the case of institution failure
Authorizes banning negligent executives from the industry
Gives federal banking agencies the power to prohibit an executive from working at any insured bank if their negligence caused a financial institution to fail.
Reference
Text:
Section:
Sec. 3(a)
Header:
Recoupment of compensation from executive officers and directors
Removes time limits for clawbacks in cases of fraud
Specifies that if an executive's actions involved fraud, there is no time limit on the government's ability to recover their compensation.
Reference
Text:
Section:
Sec. 3(b)
Header:
Clawback authority relating to orderly liquidation authority
Applies clawback rules to large financial companies
Amends the Dodd-Frank Act to allow the FDIC to recover pay from executives of large, complex financial companies, not just traditional banks, under similar conditions.
Who does this affect?
- Bank Executives and Directors
- Federal Financial Regulators
- Financial Institutions
What is the real world impact?
•
Increases accountability for bank leadership
Creates a direct financial penalty for executives whose poor management or negligence leads to a bank's collapse. This aims to discourage excessively risky behavior by making the personal consequences for failure more severe.
•
Strengthens regulatory power
Provides federal agencies like the FDIC with stronger tools to punish misconduct after a bank fails. This includes the ability to ban individuals from the industry, which was previously harder to do without proving more serious wrongdoing.
When does this start?
The new rules and penalties would take effect as soon as the bill is signed into law.