[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2190 Reported in Senate (RS)]
<DOC>
Calendar No. 115
118th CONGRESS
1st Session
S. 2190
To amend the Federal Deposit Insurance Act to increase bank executive
accountability and to improve financial stability, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 22, 2023
Mr. Brown from the Committee on Banking, Housing, and Urban Affairs,
reported the following original bill; which was read twice and placed
on the calendar
_______________________________________________________________________
A BILL
To amend the Federal Deposit Insurance Act to increase bank executive
accountability and to improve financial stability, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Recovering Executive Compensation
Obtained from Unaccountable Practices Act of 2023'' or the ``RECOUP Act
of 2023''.
SEC. 2. REMOVAL AND PROHIBITION AUTHORITIES.
Section 8(e) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)) is amended--
(1) in paragraph (1)--
(A) in subparagraph (A)--
(i) in clause (ii), by striking ``or'' at
the end;
(ii) in clause (iii), by inserting ``or''
at the end; and
(iii) by adding at the end the following:
``(iv) in the case of a senior executive,
as defined in paragraph (2)(C), failed to carry
out the responsibilities of the senior
executive for governance, operations, or risk
or financial management of an insured
depository institution or business
institution;'';
(B) in subparagraph (B), in the matter preceding
clause (i), by inserting ``failure,'' after
``practice,''; and
(C) in subparagraph (C)--
(i) in the matter preceding clause (i), by
inserting ``failure,'' after ``practice,''; and
(ii) by striking clause (ii) and inserting
the following:
``(ii) demonstrates--
``(I) willful or continuing
disregard by such party for the safety
or soundness of such insured depository
institution or business institution; or
``(II) in the case of a senior
executive, as defined in paragraph
(2)(C), gross negligence by such senior
executive in the performance of the
duties of the senior executive to the
insured depository institution or
business institution,''; and
(2) in paragraph (2)--
(A) in subparagraph (A)--
(i) in clause (iii), by striking ``or'' at
the end;
(ii) by redesignating clause (iv) as clause
(v); and
(iii) by inserting after clause (iii) the
following:
``(iv) a senior executive of an insured
depository institution has--
``(I) breached any fiduciary duty
owed to the institution, if the breach
is determined to require grossly
negligent, reckless, or willful
conduct;
``(II) failed to appropriately
implement financial, risk, or
supervisory reporting or information
system or controls; or
``(III) having implemented a system
or controls described in subclause
(II), has failed to oversee its
operations; or''; and
(B) by adding at the end the following:
``(C) Definition.--In this paragraph, the term
`senior executive' means an individual who has
oversight authority for managing the overall
governance, operations, risk, or finances of a
depository institution or depository institution
holding company, including the president, the chief
executive officer, the chief operating officer, the
chief financial officer, the chief risk officer, the
chief legal officer, the chairman of the board, an
inside director of the board of directors, and an
individual who occupies an equivalent position, as
determined by the depository institution or depository
institution holding company, as applicable.''.
SEC. 3. GOVERNANCE AND ACCOUNTABILITY STANDARDS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by adding at the end the following:
``SEC. 54. GOVERNANCE AND ACCOUNTABILITY STANDARDS.
``(a) Definition.--In this section, the term `senior executive' has
the meaning given the term in section 8(e)(2)(C).
``(b) Adoption of Standards.--Except as provided in subsection (d),
each depository institution and depository institution holding company
shall adopt governance and accountability standards in the bylaws (or
their equivalents) of the depository institution or depository
institution holding company, as applicable, that promote safety and
soundness, responsiveness to supervisory matters, and responsible
management.
``(c) Required Contents.--
``(1) In general.--The standards adopted under subsection
(b) shall include--
``(A) policies for senior executives and members of
the board of directors of the depository institution or
depository institution holding company relating to
appropriate risk management and responsiveness to
supervisory matters, including responding to the
appropriate Federal banking agency and State banking
supervisor, as applicable, on supervisory matters on a
timely basis;
``(B) accountability and corporate governance
mechanisms and controls such as--
``(i) directing such senior executives and
board of directors to implement reporting or
information system or controls and oversee such
systems appropriately and prudently;
``(ii) directing that management does not
deviate from sound governance, internal
control, or risk management; and
``(iii) directing that appropriate long-
term risk management be tailored to long-term
economic conditions; and
``(C) except as provided in paragraph (2) and
subsection (d), in the event of the failure of the
depository institution or depository institution
holding company, as applicable, clawback authority that
permits the board of directors of the depository
institution or depository institution holding company
(or the equivalent), or, if the Corporation has been
appointed receiver or conservator of the depository
institution, the Corporation, in its capacity as
receiver or conservator, to recover from a senior
executive of the depository institution or depository
institution holding company who is responsible for the
failed condition of the depository institution or
depository institution holding company--
``(i) any bonus, other incentive-based or
equity-based compensation, severance pay, or
golden parachute benefits received by that
senior executive from the depository
institution or depository institution holding
company during the 24-month period preceding
the failure of the depository institution or
depository institution holding company; and
``(ii) any profits realized by that senior
executive from the sale of securities of the
entity during the 24-month period described in
clause (i).
``(2) Exception.--Paragraph (1)(C) shall not apply to any
senior executive--
``(A) who has been employed by the depository
institution or depository institution holding company
for not more than 18 months before the date of the
failure of the depository institution or depository
institution holding company; and
``(B) whose conduct did not contribute to the
failure of the depository institution or depository
institution holding company, as applicable.
``(d) Exception.--This section shall not apply to a depository
institution or depository institution holding company with total
consolidated assets of not more than $10,000,000,000.''.
SEC. 4. CEASE-AND-DESIST PROCEEDINGS.
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) Recovery of compensation.--If the Corporation is
appointed receiver or conservator of an insured depository
institution with total consolidated assets of more than
$10,000,000,000, the Corporation may recover for the
receivership or conservatorship incentive-based compensation,
equity-based compensation, severance pay, golden parachute
benefits, or compensation that is granted or vested based
wholly or in part upon the attainment of any financial
reporting measure or other performance metric, and any profits
realized from the purchase or sale of securities of the
depository institution or depository institution holding
company during the 24-month period preceding the failure of the
insured depository institution from any senior executive, as
defined in subsection (e)(2)(C), who is responsible for the
failed condition of the depository institution or depository
institution holding company.''.
SEC. 5. CIVIL MONEY PENALTIES.
Section 8(i)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1818(i)(2)) is amended--
(1) in subparagraph (C)(i), in the matter preceding
subclause (I), by inserting ``or, in the case of a senior
executive, as defined in subsection (e)(2)(C), recklessly''
after ``knowingly''; and
(2) in subparagraph (D)(i), by striking ``$1,000,000'' and
inserting ``$3,000,000''.
SEC. 6. FAILED BANK MERGERS AND ACQUISITIONS.
(a) Failed Bank Mergers.--Section 18(c)(13)(B) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(c)(13)(B)) is amended by striking
``section 13.'' and inserting ``section 13, if--
``(i) at the time the responsible agency proposes to
approve the application, there is no application or proposed
application (other than an application that also would be
subject to the prohibition in subparagraph (A)) to acquire the
1 or more insured depository institutions in default or in
danger of default pending before any appropriate Federal
banking agency that would, according to the responsible agency
for such application, meet all applicable standards for
approval by the responsible agency;
``(ii) the Corporation would provide assistance under
section 13 with respect to the interstate merger transaction;
and
``(iii) the Corporation has determined that the interstate
merger transaction that is the subject of the application to
the responsible agency is the only proposed transaction to
acquire, directly or indirectly, the 1 or more insured
depository institutions in default or in danger of default
pending before the Corporation (other than an interstate merger
transaction that also would be subject to the prohibition in
subparagraph (A)) that would permit the Corporation to--
``(I) comply with the least-cost resolution
requirements set forth in section 13(c)(4); or
``(II) avoid the serious adverse effects on
economic conditions or financial stability that would
occur absent exercise of the authority in section
13(c)(4)(G), if a systemic risk determination has been
made under such section with respect to the insured
depository institution or institutions that are the
subject of the application.''.
(b) Failed Bank Acquisitions.--Section 3(d)(5) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(d)(5)) is amended--
(1) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively, and adjusting the margins
accordingly;
(2) in the matter preceding clause (i), as so redesignated,
by striking ``The Board may approve'' and inserting the
following:
``(A) Except as provided in subparagraph (B), the
Board may approve''; and
(3) by inserting at the end the following:
``(B) Notwithstanding subparagraph (A), the Board
may approve an application that would otherwise be
subject to the prohibition in subparagraph (A) or (B)
of paragraph (2) if--
``(i) at the time the Board proposes to
approve the application, there is no
application or proposed application (other than
an application that also would be subject to
the prohibitions in subparagraph (A) or (B) of
paragraph (2)) to acquire, directly or
indirectly, the 1 or more banks in default or
in danger of default, or the acquisition with
respect to which assistance is provided under
section 13(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1823(c)), pending before the
Board that would meet all applicable standards
for approval under this section;
``(ii) the Federal Deposit Insurance
Corporation would provide assistance under
section 13 of the Federal Deposit Insurance Act
(12 U.S.C. 1823) with respect to the
acquisition that is the subject of the
application to the Board; and
``(iii) the Federal Deposit Insurance
Corporation has determined that the acquisition
is the only proposed transaction to acquire,
directly or indirectly, the 1 or more banks in
default or in danger of default pending before
the Corporation (other than an acquisition that
also would be subject to the prohibition in
subparagraph (A) or (B) of paragraph (2)) that
would permit the Corporation to--
``(I) comply with the least-cost
resolution requirements set forth in
section 13(c)(4) of the Federal Deposit
Insurance Act (12 U.S.C. 1823(c)(4));
or
``(II) avoid the serious adverse
effects on economic conditions or
financial stability that would occur
absent exercise of the authority in
section 13(c)(4)(G) of the Federal
Deposit Insurance Act (12 U.S.C.
1823(c)(4)(G)), if a systemic risk
determination has been made under such
section with respect to the bank or
banks that are the subject of the
application.''.
SEC. 7. TRANSPARENCY RELATING TO FAILED INSTITUTIONS.
(a) Definitions.--In this section:
(1) Appropriate federal banking agency; depository
institution.--The terms ``appropriate Federal banking agency''
and ``depository institution'' have the meanings given the
terms in section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813).
(2) Covered institution.--The term ``covered institution''
means a depository institution with more than $10,000,000,000
in total consolidated assets.
(b) Supervision Review and Public Report.--Not later than 180 days
(or during a period of financial stress, a reasonable time) after the
failure of a covered institution, each appropriate Federal banking
agency shall complete a review of the management, supervision, and
regulation of that institution and make publicly available a report
detailing the findings of the agency.
SEC. 8. FEDERAL RESERVE SUPERVISION AND REGULATION REPORT.
Not less frequently than semiannually, the Board of Governors of
the Federal Reserve System shall make publicly available a report on--
(1) the supervisory and regulatory policies and actions of
the Board;
(2) the current banking conditions; and
(3) any internal changes the Board is making to the
operations and culture of the Board with respect to the
supervisory and regulatory actions described in paragraph (1),
including the frameworks, strategies, and metrics that the
Board is using to--
(A) improve internal communication within the
Federal Reserve System and with Federal banking
agencies and State banking supervisors;
(B) enhance the process by which the Board solicits
and receives public input; and
(C) ensure timely, appropriate, and effective
actions and communications are taken in response to
supervisory concerns;
(4) the budgets, staffing, and any use of outside services
to accomplish the items described in paragraph (3); and
(5) the progress made for each of the metrics for each of
the items described in paragraph (3).
SEC. 9. REPORTS AND TESTIMONY.
(a) In General.--Not later than 180 days (or during a period of
financial stress, a reasonable time) after the appointment of the
Federal Deposit Insurance Corporation as receiver or conservator of an
insured depository institution with more than $10,000,000,000 in total
consolidated assets, as those terms are defined in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813), the inspector general
of the primary Federal regulator of the insured depository institution
or depository institution holding company, including the Board of
Governors of the Federal Reserve System, shall submit to the Committee
on Banking, Housing, and Urban Affairs of the Senate and the Committee
on Financial Services of the House of Representatives a report that
includes--
(1) an evaluation of the effectiveness of the primary
Federal regulator in carrying out its supervisory
responsibilities with respect to the insured depository
institution or depository institution holding company;
(2) an identification of any acts or omissions on the part
of officials of the primary Federal regulator that contributed
to the failure of the insured depository institution or
depository institution holding company;
(3) an identification of any actions that could have been
taken by the primary Federal regulator that would have
prevented the failure of the insured depository institution or
depository institution holding company; and
(4) an identification of the causes of the failure of the
insured depository institution or depository institution
holding company, including actions or omissions by both the
primary Federal regulator and management of the insured
depository institution or depository institution holding
company.
(b) Testimony.--Not later than 30 days after the date on which the
report required under subsection (a) is received, the inspector general
of the primary Federal regulator shall be available to testify before
the committees described in subsection (a).
SEC. 10. SENSE OF CONGRESS.
It is the Sense of Congress that--
(1) the financial system of the United States is strong and
resilient, and the vast majority of the financial institutions
in the United States are well managed;
(2) in order to ensure the financial system of the United
States remains strong and resilient, mismanagement by senior
executives must be deterred;
(3) financial regulators should operate in an appropriate
and transparent manner; and
(4) this Act and the amendments made by this Act should not
be used to penalize senior executives of healthy financial
institutions that are appropriately managed.
SEC. 11. RULE OF CONSTRUCTION.
Except as otherwise specifically provided herein, nothing in this
Act, or the amendments made by this Act, may be construed to amend or
alter the authority of the Federal Deposit Insurance Corporation or any
other appropriate Federal banking agency, as defined in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813).
Calendar No. 115
118th CONGRESS
1st Session
S. 2190
_______________________________________________________________________
A BILL
To amend the Federal Deposit Insurance Act to increase bank executive
accountability and to improve financial stability, and for other
purposes.
_______________________________________________________________________
June 22, 2023
Read twice and placed on the calendar