H.R. 7886 — Failed Bank Executives Accountability and Consequences Act

This section expresses the sense of Congress that (1) financial regulators and law enforcement agencies should fully exercise their authorities to investigate and hold accountable executive officers and board members of Silicon Valley Bank, Signature Bank, First Republic Bank, and any other bank for misconduct; and (2) the Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, Securities and Exchange Commission, and Federal Housing Finance Agency should jointly finalize regulations under sec. 956 of the Dodd-Frank Act (i.e., on incentive-based compensation at covered financial institutions) that include robust clawback requirements.

This section amends the Federal Deposit Insurance Act (1) to authorize the FDIC, when acting as conservator or receiver of an insured depository institution, to recover from any current or former executive officer or director whose negligence caused financial loss to the institution any compensation received during the two-year period preceding the appointment (no time limit for fraud) and (2) to require the FDIC to issue implementing regulations defining compensation (i.e., salary, bonuses, incentives, benefits, severance, deferred compensation, golden parachutes, and profits from securities sales of the institution or affiliate). It further revises the Dodd-Frank Act to authorize the FDIC, as receiver of a covered financial company (i.e., a failing nonbank financial firm posing systemic risk), to recover from any current or former executive officer or director whose negligence caused financial loss to the company any compensation received during the two-year period preceding the appointment (no time limit for fraud).

This section authorizes the appropriate Federal banking agency to issue suspension, removal, or prohibition orders against institution-affiliated parties (i.e., directors, officers, employees, or controlling stockholders) who negligently caused financial loss to a failed insured depository institution, by inserting new paragraph (3) in section 8(e) of the Federal Deposit Insurance Act (FDI Act) and redesignating paragraphs (3) through (7) as paragraphs (4) through (8), respectively. It makes conforming amendments to subsections (e), (f), (g), and (j) of section 8 and section 10(k)(6) of the FDI Act to update cross-references to the redesignated paragraphs and include the new authority.

This section amends the civil money penalty provisions of the Federal Deposit Insurance Act to establish fines for executive officers or directors of failed insured depository institutions who negligently, knowingly, or recklessly cause financial loss to the institution, notwithstanding existing penalty tiers (A)–(C). It (1) imposes a first-tier penalty of up to $25,000 for each day of negligent conduct; and (2) imposes a second-tier penalty of up to the applicable maximum amount under redesignated subparagraph (E) (previously (D)) for each day of knowing or reckless conduct. The section makes conforming amendments to update cross-references in subsequent subparagraphs.

This section provides a rule of construction stating that this Act and its amendments do not limit the pre-enactment enforcement authorities of financial regulators and law enforcement agencies to hold accountable executive officers and board members of insured depository institutions (i.e., FDIC-insured banks) and covered financial companies (i.e., systemically important nonbanks under Dodd-Frank Title II) for misconduct.