Senate Banking Committee to consider bipartisan bill to claw back executives' pay when banks fail
Lawmakers are attempting to hold banking executives who oversee bank failures accountable, by giving regulators power to claw back compensation.
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Chairman Sherrod Brown, D-Ohio, left, and ranking member Sen. Tim Scott, R-S.C., arrive for the Senate Banking, Housing and Urban Affairs Committee hearing discussing recent bank failures, April 27, 2023.
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WASHINGTON — Members of the Senate Banking Committee on Wednesday will consider a bill that would aim to hold banking executives accountable in the wake of the collapse of several big banks.
The Recovering Executive Compensation from Unaccountable Practices Act, known as the RECOUP Act, would give regulators power to claw back compensation for executives of failed banks, institute penalties for misconduct and direct banks to beef up corporate governance, according to the committee.
Sens. Sherrod Brown, D-Ohio, chairman of the committee, and ranking member Tim Scott, R-S.C., announced an agreement on the legislation last week. Brown is up for reelection next year, and Scott is running for the 2024 Republican presidential nomination.
What's in the RECOUP Act
The bill aims to:
Allow regulators to remove senior banking executives who demonstrate misconduct in oversight, including failures to apply risk controls and breaches of fiduciary duty. It would also give regulators the discretion to ban these executives from the industry.Require banks to adopt enforcement of responsible management bylaws, including allowances for the bank's board or the Federal Deposit Insurance Corporation to claw back compensation an executive received in the two years before a bank's failure.Boost regulatory control over penalties for executives who break the law and increase the maximum civil penalty for the worst violations.Define a "senior executive" as those who are among a bank's senior leadership and certain directors.Scott said the bill is a "commonsense solution to address executive accountability."
Brown said, "It's time for CEOs to face consequences for their actions, just like everyone else."
The RECOUP Act is one of several bills introduced in recent months targeting regulatory and management lapses that led to failures like those of Silicon Valley Bank and Signature Bank earlier this year.
Sen. Elizabeth Warren, D-Mass., a member of the Senate Banking Committee, spearheaded a bipartisan clawback bill with Democratic Sen. Catherine Cortez Masto, of Nevada, and Republican Sens. Josh Hawley, of Missouri, and Mike Braun, of Indiana.
Released in March, the bill calls for clawbacks of all or part of the compensation received by bank executives during the five years preceding a bank failure, compared with two years of clawbacks under the RECOUP Act.
