Failed Bank Executives Clawback Act

Bill: 118-hr-2972
Sponsor: full_name: Rep. Porter, Katie [D-CA-47]
Introduced: 2023-04-27
Policy area: Finance and Financial Sector
Latest action: action_date: 2023-04-27
text: Referred to the House Committee on Financial Services.

Summaries:
action_date: 2023-04-27
action_desc: Introduced in House
text: <p class="MsoNormal"><b>Failed Bank Executives Clawback Act</b></p> <p class="MsoNormal">This bill requires the Federal Deposit Insurance Corporation (FDIC) to claw back compensation paid to certain responsible parties when an insured depository institution or financial company is placed into FDIC receivership.&nbsp; </p> <p class="MsoNormal">Specifically, all or part of the compensation paid the previous five years to an institution-affiliated party substantially responsible for the condition of the institution must be paid to FDIC to prevent unjust enrichment and to assure that the party bears losses consistent with their responsibility. Compensation includes salary, bonuses, awards, and profits from buying or selling securities.</p> <p class="MsoNormal"> </p> <p class="MsoNormal">Finally, the bill establishes that an insured depository institution's holding company is liable to the FDIC for payments to insured depositors, the FDIC's receiver costs, and interest when the institution is under FDIC receivership. </p>

tv_txt: I 118th CONGRESS 1st Session H. R. 2972 IN THE HOUSE OF REPRESENTATIVES April 27, 2023 Ms. Porter (for herself, Mrs. Spartz , Mr. Gallego , Mr. Buck , and Ms. Perez ) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Federal Deposit Insurance Act to clarify that the Federal Deposit Insurance Corporation and appropriate Federal regulators have the authority to claw back certain compensation paid to executives.

1. Short title This Act may be cited as the Failed Bank Executives Clawback Act . 2. Claw back Section 8(b) of the Federal Deposit Insurance Act ( 12 U.S.C. 1818(b) ) is amended by inserting after paragraph (8) the following: (9) Clawback (A) Definition In this paragraph, the term covered compensation means— (i) salary; (ii) bonuses; (iii) any compensation that is granted, earned, or vested based wholly or in part upon the attainment of any financial reporting measure or other performance metric; (iv) equity-based compensation; (v) time- or service-based awards; (vi) awards based on nonfinancial metrics; and (vii) any profits realized from the buying or selling of securities. (B) Clawback (i) Liability of institution-affiliated party An institution-affiliated party that is substantially responsible for the condition of the insured depository institution is liable to the Corporation for any covered compensation clawed back under clause (ii). (ii) Required clawbacks In the case of insolvency or resolution of any insured depository institution, the Corporation shall claw back all or part of the covered compensation received by an institution-affiliated party during the preceding 5 years as is necessary to prevent unjust enrichment and assure that the party bears losses consistent with the responsibility of the party. (iii) Deposit Any covered compensation clawed back under this subparagraph shall be deposited into the Deposit Insurance Fund or into the general fund of the Treasury. . 3. Orderly liquidation of covered financial companies Section 204 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5384 ) is amended by adding at the end the following: (e) Clawback (1) Definition In this subsection, the term covered compensation means— (A) salary; (B) bonuses; (C) any compensation that is granted, earned, or vested based wholly or in part upon the attainment of any financial reporting measure or other performance metric; (D) equity-based compensation; (E) time- or service-based awards; (F) awards based on nonfinancial metrics; and (G) any profits realized from the buying or selling of securities. (2) Clawback (A) Liability of institution-affiliated party An institution-affiliated party that is substantially responsible for the condition of a covered financial company is liable to the Corporation for any covered compensation clawed back under subparagraph (B). (B) Required clawbacks In the case of insolvency or resolution of any covered financial company, the Corporation shall claw back all or part of the covered compensation received by an institution-affiliated party during the preceding 5 years as is necessary to prevent unjust enrichment and assure that the party bears losses consistent with the responsibility of the party. (C) Deposit Any covered compensation clawed back under this subparagraph shall be deposited into the Deposit Insurance Fund or into the general fund of the Treasury. . 4. Liability to the Federal Deposit Insurance Corporation The Bank Holding Company Act ( 12 U.S.C. 1841 et seq. ) is amended by adding at the end the following: 15. Liability to the Federal Deposit Insurance Corporation (a) In general Any bank holding company that has control over an insured depository institution for which the Corporation is appointed and acts as receiver under section 11 of the Federal Deposit Insurance Corporation Act shall be liable to the Corporation for— (1) any payments from the Deposit Insurance Fund established under section 11 of the Federal Deposit Insurance Act to insured depositors of such insured depository institution; (2) any costs incurred by the Corporation as receiver of such insured depository institution; and (3) any interest on the amounts described in paragraphs (1) and (2). (b) Lien against all assets (1) In general Any liability of a bank holding company to the Corporation under subsection (a) shall be secured by a lien on all assets of such bank holding company. (2) Specifications Any lien arising under this subsection— (A) shall be deemed to be automatically perfected; (B) shall have priority over all other liens, irrespective of their date of creation or perfection; and (C) may not be avoided in a proceeding under title 11, United States Code. (c) Priority of liability (1) In general Any liability of a bank holding company to the Corporation under subsection (a) shall have payment priority over all other liabilities of and interests in the bank holding company. (2) Clarifying rule No payment shall be made to any other creditor or shareholder of the bank holding company until the liability to the Corporation under this section has been paid in full. (d) Definitions In this section: (1) Insured depository institution The term insured depository institution has the meaning given the term in section 3 of the Federal Deposit Insurance Act. (2) Corporation The term Corporation means the Federal Deposit Insurance Corporation. .