WASHINGTON — House Democrats on Wednesday will release a slate of reform bills in response to the recent bank failures that triggered the worst crisis for the sector since 2008.
Members of the House Financial Services Committee, led by rating member Rep. Maxine Waters, D-Calif., are searching for an expansion to federal regulatory authorities and more oversight for bank executives, including clawbacks on compensation, fines and the closure of loopholes that allowed some banks to flee standards established under the 2010 Dodd-Frank Act.
The committee has closely scrutinized the actions of the Treasury Department, the Federal Deposit Insurance Corporation, or FDIC, and other federal regulators together with executives of Silicon Valley Bank and Signature Bank leading as much as and within the aftermath of the banks’ collapse.
Waters urged committee Republicans to follow the lead of the Senate Banking Committee and work with Democrats to advance bipartisan laws to guard the economy from future harm.
“The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank clarify that it’s past time for laws aimed toward strengthening the protection and soundness of our banking system and enhancing bank executive accountability,” she said.
Listed below are the bills to be considered:
Failed Bank Executives Accountability and Consequences Act: This bill would expand regulatory authority on compensation clawbacks, fines and banning executives who contribute to a bank’s failure from future work within the industry. President Joe Biden called for these actions shortly after the FDIC took over SVB and Signature Bank in March. The bill is cosponsored by Waters and fellow Democratic Reps. Nydia Velazquez, of Recent York; Brad Sherman and Juan Vargas, each of California; David Scott, of Georgia; Al Green and Sylvia Garcia of Texas; Emanuel Cleaver, of Missouri; Joyce Beatty and Steven Horsford, each of Ohio; and Rashida Tlaib, of Michigan. Some Republicans have expressed support for this act, which is analogous to the bipartisan bill the Senate Banking Committee is considering.
Incentivizing Secure and Sound Banking Act: This measure would expand regulators’ authority to ban stock sales for executives when banks are issued cease-and-desist orders for violating the law. It might also robotically restrict stock sales by senior executives of banks that receive poor exam rankings or are out of compliance with supervisory citations. The bill would have prevented SVB bank executives from cashing out after repeated warnings by regulators, based on Democrats. It’s cosponsored by Waters, Velazquez, Sherman, Green, Cleaver, Beatty, Horsford and Tlaib.
Closing the Enhanced Prudential Standards Loophole Act: This can aim to shut loopholes surrounding the Dodd-Frank Act’s enhanced prudential standards for banks that shouldn’t have a bank holding company. Neither Signature Bank nor SVB had a bank holding company before they collapsed. The bill would be certain that large banks with a size, complexity and risk equal to that of huge banks with holding firms might be subject to similar enhanced capital, liquidity, stress testing, resolution planning and other related requirements. It’s cosponsored by Waters, Velazquez, Sherman, Green, Cleaver, Beatty, Vargas, Garcia and Tlaib.
H.R. 4204, Shielding Community Banks from Systemic Risk Assessments Act: This measure would permanently exempt banks with lower than $5 billion in total assets from special assessments the FDIC collects when a systemic risk exception is triggered, which was done to guard depositors at Silicon Valley Bank and Signature Bank. The FDIC could be allowed to set the next threshold while requiring a minimal impact on banks with between $5 billion and $50 billion in total assets. It’s sponsored by Green.
H.R. 4062, Chief Risk Officer Enforcement and Accountability Act: This measure would have federal regulators require large banks to have a chief risk officer. Banks would also should notify federal and state regulators of a CRO emptiness inside 24 hours and supply a hiring plan inside seven days. After 60 days, if the CRO position stays vacant, the bank must notify the general public and be subject to an automatic cap on asset growth until the job is filled. The bill is cosponsored by Sherman, Green, and fellow Democratic Reps. Sean Casten, of Illinois; Josh Gottheimer, of Recent Jersey; Ritchie Torres, of Recent York; and Wiley Nickel, of North Carolina.
H.R. 3914, Failing Bank Acquisition Fairness Act: This bill would have the FDIC only consider bids from megabanks with greater than 10% of total deposits if no other institutions meet the least-cost test. This might ensure smaller banks have a probability to buy failed banks, based on Democrats. It’s sponsored by Rep. Stephen Lynch, D-Mass.
H.R. 3992, Effective Bank Regulation Act: This laws would require regulators to expand stress testing requirements. As an alternative of two stress test scenarios, the bill would require five. It might also be certain that the Federal Reserve does stress tests for situations when rates of interest are rising or falling. It’s sponsored by Sherman.
H.R. 4116, Systemic Risk Authority Transparency Act: This bill would require regulators and the watchdog Government Accountability Office, or GAO, to provide the identical type of post-failure reports that the Federal Reserve, FDIC and GAO did after Silicon Valley Bank’s and Signature Bank’s failure. Initial reports could be required inside 60 days and comprehensive reports inside 180 days. It might be applicable to any use of the systemic risk exception of the FDIC’s least cost resolution test. The bill is sponsored by Green.
H.R. 4200, Fostering Accountability in Remuneration Fund Act of 2023, or FAIR Fund Act: The laws would require big financial institutions to cover fines incurred after a failure and/or executive conduct through a deferred compensation pool that might be funded with a portion of senior executive compensation. The pool would receives a commission out between two and eight years, depending on the scale of the institution. The bill is sponsored by Tlaib.
Stopping Bonuses for Unsafe and Unsound Banking Act: This measure would freeze bonuses for executives of any large bank that does not submit an appropriate remediation plan for what’s often known as a Matter Requiring Immediate Attention, or MRIA, or the same citation from bank supervisors by a regulator-set deadline. It’s sponsored by Brittany Pettersen, D-Colo.
Bank Safety Act: Large banks could be prevented from opting out of the requirement to acknowledge Accrued Other Comprehensive Income, or AOCI, in regulatory capital under this bill. AOCI reflects the type of unrealized losses in SVB’s securities portfolio. It’s sponsored by Sherman.
Correction: This story was updated to reflect that the bills are being released Wednesday.
