Bipartisan RECOUP Act increases penalties against bad actors and requires Federal Reserve to change its slow-acting culture to prevent bank failures
WASHINGTON – The U.S. Senate Committee on Banking, Housing, and Urban Affairs approved the Recovering Executive Compensation from Unaccountable Practices (RECOUP) Act – bipartisan legislation shaped by Arizona senior Senator Kyrsten Sinema in response to the failure of Silicon Valley Bank, Signature Bank, and First Republic Bank. The Senator’s legislation holds failed bank executives accountable by clawing back their compensation and addresses regulatory and supervisory failures by requiring the Federal Reserve to change its slow-acting culture.
For months, Sinema has been building bipartisan consensus for legislation that claws back failed bank executives’ compensation – including bonuses, stock sales, incentive pay, and golden parachutes. The Senator also included an amendment requiring the Federal Reserve to routinely report on how they are changing their culture and operations to respond to pending regulatory and supervisory matters. Sinema’s consensus building assisted bipartisan negotiations between Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Ranking Member Tim Scott (R-S.C.) that resulted in the RECOUP Act.
“After the collapse of Silicon Valley Bank, we rejected the partisan talking points and got to work. Thanks to our work across the aisle, failed bank executives and the Federal Reserve will be held accountable – increasing transparency, stopping bad actors, and restoring confidence in our banking system,” said Sinema, a member of the Senate Banking Committee.
In the immediate wake of the Silicon Valley Bank collapse, Sinema cosponsored the DEPOSIT Act, legislation to claw back failed bank executives’ compensation – and since then, the Senator has worked with colleagues in both parties to strike an agreement on broader clawback legislation.
The amendment Sinema led and passed unanimously requires the Federal Reserve to report on the frameworks, strategies, and metrics that it is utilizing to improve internal communication, provide more and better opportunities for public input on pending Fed actions, and ensures regulators take timely, appropriate, and forceful action.
The RECOUP Act strengthens banking agencies’ ability to remove or prohibit senior executives who did not appropriately oversee and manage the risks and governance of their banks, including authority to ban failed bank executives from re-entering the industry and putting more taxpayers at risk.
The Sinema-backed legislation also increases and strengthens penalties against bad actors, including tougher civil money penalties for bank executives who are grossly negligent.
Before the Silicon Valley Bank collapse, multiple key executives profited from substantial stock sales, even as the bank was in financial trouble. The RECOUP Act intends to capture bonuses and stock sales made by future failed executives – holding them accountable and discouraging future failures.