S. 4050 — Failed Bank Executives Clawback Act

This section establishes a clawback requirement in the Federal Deposit Insurance Act under which the FDIC must recover all or part of covered compensation received by covered parties during the preceding three years upon the insolvency, resolution, or appointment of the FDIC as receiver for any insured depository institution (IDI) with total assets exceeding $10 billion. Covered compensation includes salary, bonuses, performance-based or equity awards, time- or service-based awards, nonfinancial metric awards, and profits from securities trading; covered parties are directors, officers, controlling stockholders (excluding bank or savings and loan holding companies), change-in-control notice filers under section 7(j), or other participants (e.g., shareholders or joint venture partners) primarily responsible for an IDI's failed condition that caused more than minimal financial loss or significant adverse effect. (Thus, recovered amounts are deposited into the Deposit Insurance Fund.)

This section revises the purpose statement of the orderly liquidation authority to require the FDIC and other agencies to hold parties responsible for a financial company's condition—including management, directors, and third parties—accountable for losses consistent with their responsibility for any financial company for which the FDIC is appointed receiver, regardless of the appointment process (previously limited to the specific covered financial company). (Thus, the accountability measures, such as actions for damages, restitution, and recoupment of compensation, extend beyond Dodd-Frank Title II receiverships for systemically important nonbank financial companies to all FDIC receiverships.)