The Senate Banking Committee has approved a bill granting regulators the authority to seize pay from executives at failed banks.
This marks the first significant legislative response to the banking crisis rattling the financial system.
The bipartisan proposal, a compromise between Senators Sherrod Brown (D-Ohio) and Tim Scott (R-S.C.), garnered broad support within the committee, passing with a vote of 21-2.
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The bill will now move to the full Senate, although its timeline and prospects in the Republican-controlled House are uncertain.
Under the proposed legislation, the Federal Deposit Insurance Corp. (FDIC) would be empowered to strip bonuses and stock sale proceeds received by executives in the two years preceding their banks’ collapses.
Additionally, the banking regulator would have the ability to impose penalties of up to $3 million for cases of reckless mismanagement.
A previous bill, led by Senators Elizabeth Warren (D-Mass.) and J.D. Vance (R-Ohio), sought to impose more stringent penalties on executives.
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However, Warren has now supported the Brown-Scott version, deeming it a reasonable compromise.
Following the collapse of Silicon Valley Bank the Biden administration urged Congress to strengthen regulators’ authority in holding bank executives personally accountable for their institutions’ failures.
The failure has destabilized the banking sector and resulted in the fall of Signature Bank and First Republic.
Notably, federal investigators are examining chief executive Greg Becker’s $3.6 million stock sales in the days leading up to Silicon Valley Bank’s collapse.
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Financial reform advocates have welcomed the bill’s advancement, viewing it as an important step that addresses public demands.
Natalia Renta, senior policy counsel at the liberal coalition Americans for Financial Reform, called the bill’s advancement “an important step the public has been craving.”
She said: “Though it’s a sea change that some Republicans are finally joining forces with Democrats to advance financial reform, this year’s banking crisis reminds us that there is a lot more to do.”
