Bank Management Accountability Act

Bill: 118-s-1181
Sponsor: full_name: Sen. Reed, Jack [D-RI]
Introduced: 2023-04-18
Policy area: Finance and Financial Sector
Subjects: Administrative law and regulatory procedures

Bank accounts, deposits, capital

Banking and financial institutions regulation

Civil actions and liability

Consumer affairs

Corporate finance and management

Federal Deposit Insurance Corporation (FDIC)

Financial crises and stabilization

Wages and earnings
Latest action: action_date: 2023-05-04
text: Committee on Banking, Housing, and Urban Affairs. Hearings held.

Summaries:
action_date: 2023-04-18
action_desc: Introduced in Senate
text: <p class="MsoNormal" style="line-height: normal;"><b>Bank Management Accountability Act</b></p> <p class="MsoNormal" style="line-height: normal;">This bill expands the ability of financial regulators to recover compensation from senior executives or directors at failed banks and financial institutions and to impose bans on their future participation at any financial company.</p> <p class="MsoNormal" style="line-height: normal;">The bill authorizes the Federal Deposit Insurance Corporation (FDIC) to recover compensation paid to certain current or former senior executives or directors of an insured depository institution for which FDIC is a receiver or conservator. </p> <p class="MsoNormal" style="line-height: normal;">If a current or former senior executive or director is substantially responsible for the failed condition of the insured depository institution, FDIC may recover any compensation received during the 2-year period prior to FDIC appointment as receiver or conservator of the insured depository institution, except for cases of fraud, where no time limit shall apply. </p> <p class="MsoNormal" style="line-height: normal;">The bill also (1) prohibits liability insurance policies from covering such compensation, and (2) authorizes FDIC to prohibit any further participation by those individuals in the affairs of any financial company for not less than 2 years.</p> <p class="MsoNormal" style="line-height: normal;">Finally, the bill expands the authority of the Board of Governors of the Federal Reserve System and the FDIC to ban senior executives at systemically important financial institutions in receivership from participating for 2 years in the affairs of any financial company. Specifically, the bill removes the requirement that, to be subject to such a ban, the violation must involve personal dishonesty or demonstrate willful or continuing disregard for the company's safety and soundness.</p>

tv_txt: II 118th CONGRESS 1st Session S. 1181 IN THE SENATE OF THE UNITED STATES April 18, 2023 Mr. Reed (for himself and Mr. Grassley ) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Federal Deposit Insurance Act to improve financial stability, and for other purposes.

1. Short title This Act may be cited as the Bank Management Accountability Act . 2. Systemic risk determination (a) In general Section 13(c)(4)(G) of the Federal Deposit Insurance Act ( 12 U.S.C. 1823(c)(4)(G) ) is amended by adding at the end the following: (vi) Recoupment of compensation from senior executives and directors (I) In general The Corporation, as receiver or conservator of an insured depository institution under clause (i), may recover from any current or former senior executive or director of the insured depository institution, or of a covered affiliate with respect to the insured depository institution, who is substantially responsible for the failed condition of the insured depository institution, any compensation received during the 2-year period preceding the date on which the Corporation was appointed as the receiver or conservator of the insured depository institution, except that, in the case of fraud, no time limit shall apply. (II) Cost considerations In seeking to recover any compensation under subclause (I), the Corporation shall weigh the financial and deterrent benefits of that recovery against the cost of executing the recovery. (III) Personal liability Any liability insurance policy for a senior executive or director described in subclause (I) shall exclude from coverage any liability under this clause. (vii) Prohibition authority (I) In general The Corporation may take any action authorized by subclause (II), if the Corporation determines that— (aa) a senior executive or a director of an insured depository institution with respect to which the Corporation has taken action or provided assistance under clause (i), or of a covered affiliate with respect to such an insured depository institution, before the appointment of the Corporation as receiver or conservator, has, directly or indirectly— (AA) violated any law or regulation; (BB) violated any cease-and-desist order that has become final; (CC) violated any condition imposed in writing by a Federal agency in connection with any action on any application, notice, or request by the insured depository institution or covered affiliate (as applicable) or the senior executive or director (as applicable); (DD) violated any written agreement between the insured depository institution or covered affiliate (as applicable) and the Federal agency described in subitem (CC); (EE) engaged or participated in any unsafe or unsound practice; or (FF) committed or engaged in any act, omission, or practice that constitutes a breach of the fiduciary duty of that senior executive or director; and (bb) by reason of the violation, practice, or breach described in any subitem of item (aa), that senior executive or director has received financial gain or other benefit, and that violation, practice, or breach contributed to the failure of the insured depository institution. (II) Authorized actions The Corporation may serve upon a senior executive or director with respect to whom the Corporation has made a determination under subclause (I) a written notice of the intention of the Corporation to prohibit any further participation by that individual, in any manner, in the conduct of the affairs of any financial company for a period of time determined by the Corporation to be commensurate with that violation, practice, or breach, except that such period shall be not less than 2 years. (viii) Definitions In this subparagraph: (I) Compensation The term compensation means any direct or indirect financial remuneration received from an insured depository institution, or from a covered affiliate with respect to an insured depository institution, including salary, bonuses, incentives, benefits, severance pay, deferred compensation, golden parachute benefits, benefits derived from an employment contract or other compensation or benefit arrangement, perquisites, stock option plans, post-employment benefits, profits realized from a sale of securities in the insured depository institution or the covered affiliate (as applicable), or any cash or noncash payments or benefits granted to or for the benefit of a senior executive or director. (II) Covered affiliate The term covered affiliate means, with respect to an insured depository institution, any— (aa) bank holding company (as defined in section 2(a) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1841(a) )) that controls the insured depository institution; (bb) savings and loan holding company (as defined in section 10(a) of the Home Owners’ Loan Act ( 12 U.S.C. 1467a(a) )) that directly or indirectly controls the insured depository institution; (cc) subsidiary of the insured depository institution; or (dd) affiliate (as defined in section 2 of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1841(k) )) of the insured depository institution. (III) Director The term director means a member of the board of directors of a company, or of a board or committee performing a similar function to a board of directors, who has authority to vote on matters before the board or committee. (IV) Financial company The term financial company has the meaning given the term in section 201(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5381(a) ). (V) Senior executive The term senior executive — (aa) means any individual who participates or has authority to participate (other than in the capacity of a director) in major policymaking functions of a company, regardless of whether the individual has an official title or the title of the individual designates the individual as an assistant; and (bb) includes the chairman of the board, the president, any vice president, the secretary, the treasurer or chief financial officer, the general partner, and any manager of a company, unless the individual— (AA) is excluded, by resolution of the board of directors, the bylaws, the operating agreement, or the partnership agreement of the company, from participation (other than in the capacity of a director) in major policymaking functions of the company; and (BB) does not actually participate in major policymaking functions of the company. . (b) Regulations The Federal Deposit Insurance Corporation shall promulgate regulations to administer and carry out this section, in a manner that is not less stringent than the manner set forth in section 380.7 of title 12, Code of Federal Regulations (as in effect on the date of enactment of this Act). 3. Orderly liquidation authority Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5381 et seq. ) is amended— (1) in section 210(s) ( 12 U.S.C. 5390(s) ), by adding at the end the following: (4) Personal liability Any liability insurance policy for a senior executive or director described in paragraph (1) shall exclude from coverage any liability under this subsection. ; and (2) in section 213(b) ( 12 U.S.C. 5393(b) )— (A) in paragraph (1)(C), by inserting and at the end; (B) in paragraph (2), by striking ; and and inserting a period; and (C) by striking paragraph (3).