Senate Banking Committee Approves Bill to Recover Bank Executives’ Compensation

In a significant bipartisan move, the Senate Banking Committee has approved a bill that aims to hold bank executives accountable for their actions. The bill, known as the Recovering Executive Compensation from Unaccountable Practices (RECOUP) Act, not only imposes fines for misconduct and restricts failed executives from working in the financial sector, but also grants the Federal Deposit Insurance Corporation (FDIC) new powers to claw back compensation for executives.

The legislation received overwhelming support, with a 21-2 vote in favor of passing the measure out of committee. Senate Committee Chair Sherrod Brown (D-Ohio) emphasized the importance of the bill, stating, “Bank executives who take on too much risk and crash their banks shouldn’t get to land on their feet, they shouldn’t get to keep the profits they made by making bad bets with other people’s money, and they shouldn’t get to take their bad behavior to another bank.”

Sen. Tim Scott (R-S.C.), the Ranking Member, called the bill a “commonsense solution to address executive accountability” that aims to protect U.S. taxpayers and limit government overreach.

However, not all senators were in favor of the bill. Sen. Bill Hagerty (R-Tenn.) argued that it would make the biggest banks even bigger, while Sen. Thom Tillis (R-N.C.) believed it was too expansive.

While the Senate has been considering a similar bipartisan bill, the RECOUP Act stands out for its specific provision that could increase congressional oversight of the Federal Reserve. This provision may attract support from House Republicans.

Capital Requirements Debate

Despite claims that the U.S. banking system is safe and resilient, there is an ongoing debate in Washington about implementing more rules and regulations on the finance sector. One concept being discussed is increasing capital standards for medium and large companies.

Michael S. Barr, the Fed Vice Chair for Supervision, has been advocating for higher capital requirements even before the recent failures of several financial institutions. He believes that larger, more complex banks pose the greatest risk and should have higher capital requirements to ensure their resilience.

Fed Chair Jerome Powell, appearing before the House Financial Services Committee, explained that the process of implementing higher capital mandates is lengthy and would primarily affect larger entities.

Overall, the RECOUP Act represents a significant step towards holding bank executives accountable and strengthening the financial sector.