FACT SHEET: President Biden Urges Congressional Action to Strengthen Accountability for Senior Bank Executives
As the President said on Sunday when his administration took steps to stabilize the banking system, he is firmly committed to accountability for those responsible. Already, key executives that ran Silicon Valley Bank and Signature Bank – the two banks now under Federal Deposit Insurance Corporation (FDIC) receivership – have been removed, and investors in these two banks will take losses. The FDIC, the Securities and Exchange Commission, and the Department of Justice have regulatory authority to investigate the circumstances leading up to these banks entering receivership, and to take action against the management of these banks as appropriate.
But the President believes Congress can and should do more to hold senior bank executives accountable. Congress must take action to strengthen the ability of the federal government to hold senior management accountable when their banks fail and enter FDIC receivership. Specifically, when banks fail because of mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again.
The President is calling on Congress to:
Expand the FDIC’s authority to claw back compensation – including gains from stock sales – from executives at failed banks like Silicon Valley Bank and Signature Bank
The CEO of Silicon Valley Bank reportedly sold more than $3 million worth of shares just days before the bank entered FDIC receivership. The President urges Congress to expand the FDIC’s authorities to expressly cover cases like this.
Under current law, the FDIC has limited ability to claw back any compensation or gains from share sales that senior executives at Silicon Valley Bank or Signature Bank may have received shortly before their banks entered FDIC receivership. That is because the FDIC only has clawback authority under the Dodd-Frank Act’s special resolution authority, which applies to the very largest financial institutions. That authority should be extended to cover a broader set of large banks – including banks the size of Silicon Valley Bank and Signature Bank.
Strengthen the FDIC’s authority to bar executives from holding jobs in the banking industry when their banks enter receivership
Under existing law, the FDIC can bar executives from holding jobs at other banks if they engage in “willful or continuing disregard for the safety and soundness” of their bank. Congress should strengthen this tool by lowering the legal standard for imposing this prohibition when a bank is put into FDIC receivership. The President believes that if you’re responsible for the failure of one bank, you shouldn’t be able to just turn around and lead another.
Expand the FDIC’s authority to bring fines against executives of failed banks
Under current law, the FDIC may seek monetary penalties from bank executives who “recklessly” engage in a pattern of “unsafe or unsound” practices, regardless of whether that bank enters receivership. To help the agency fully address executive misconduct, Congress should expand the FDIC’s authority to seek fines from negligent executives of failed banks when their actions contribute to the failure of their firms.
The President is eager to work with Congress to strengthen accountability in these three areas – and others that Members of Congress identify. As the President has said, in his administration, no one is above the law.