Senators introduce bipartisan bill to allow seizure of pay from CEOs of failed banks

The top senators on the Senate Banking Committee unveiled bipartisan legislation Thursday that would allow regulators to claw back compensation from senior executives of failed banks.

The Recovering Executive Compensation from Unaccountable Practices (RECOUP) Act would allow the Federal Deposit Insurance Corporation (FDIC), as well as a bank’s board, to seize executives’ compensation from the 24 months before a bank’s failure.

“Americans have watched executives take their money, run banks into the ground, and get away with it too many times before,” Senate Banking Chairman Sherrod Brown (D-Ohio) said in a statement. “It’s time for CEOs to face consequences for their actions, just like everyone else.”

The push for such a clawback mechanism comes in the wake of several high-profile bank failures this spring. Silicon Valley Bank and Signature Bank collapsed within days of each other in March, sparking fears of potential contagion throughout the U.S. banking system.  

The CEO of Silicon Valley Bank reportedly received about $9.9 million in compensation in 2022, including a $1.5 million bonus, and sold off millions worth of his company’s stock in the weeks before the bank collapsed, according to MarketWatch.

“I look forward to continuing the hard work of demanding more answers from the Biden Administration and ensuring our nation never experiences these types of preventable failures again,” said Sen. Tim Scott (R-S.C.), the ranking member on the Senate Banking Committee, in a statement on the legislation.

In the wake of the bank failures, Republican lawmakers have also placed blame on the Biden administration and federal regulators for failing to take action against the banks before their collapse.