Bipartisan Bill Seeks to Hold Bank Executives Accountable for Mismanagement

U.S. Senators Jack Reed and Chuck Grassley have introduced the Bank Management Accountability Act, a bipartisan bill aimed at improving accountability at big banks and preventing executives from profiting from their mismanagement and negligence. The legislation comes in the wake of the failures of Silicon Valley Bank and Signature Bank, two systemically important banks that received exorbitant compensation as they took on excessive risks. 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, while the CEO of Signature Bank received $8.7 million in compensation in 2022 and sold millions of dollars worth of company stock in the weeks and months before the failure.

Key Takeaways:

• The Bank Management Accountability Act would make it easier for banking regulators to claw back compensation from negligent bank directors and senior executives at failed systemically important banks.
• The bill would also ban those directors and executives from future participation in the financial industry.
• The legislation would expand existing rules for clawing back compensation to include banks such as Silicon Valley Bank and Signature Bank.
• Recouped funds may not be paid out of directors and officers liability insurance coverage to ensure that executives have true personal liability and skin in the game.
• The bill would lower the standard for barring directors and senior executives at failed systemically important banks from the financial industry.
• The proposed bill aims to provide powerful disincentives against excessive risk taking and protect depositors from executives who have driven a bank into failure.

Statistics:

• The failures of Silicon Valley Bank and Signature Bank are expected to cost the Federal Deposit Insurance Corporation's (FDIC) deposit insurance fund over $20 billion.
• The Federal Reserve has extended over $143 billion in credit to the successor banks of Silicon Valley Bank and Signature Bank.
• The Bank Management Accountability Act would update the FDIC's outdated compensation clawback authority and weaken the financial industry's ban authority.
• The bill would allow the FDIC to claw back the prior two years of compensation from executives at failed systemically important banks.

Sources:

• (c) 2022 Al Bawaba (Albawaba.com) Provided by SyndiGate Media Inc. (Syndigate.info).