WASHINGTON (AP) — President Joe Biden on Friday called on Congress to allow regulators to impose tougher penalties on the executives of failed banks, including clawing back compensation and making it easier to bar them from working in the industry.
Biden wants the Federal Deposit Insurance Corporation to be able to force the return of compensation paid to executives at a broader range of banks should they fail, and to lower the threshold for the regulator to impose fines and bar executives from working at another bank.
He called on Congress to grant the FDIC those powers after the failures of Silicon Valley Bank and Signature Bank sent shockwaves through the global banking industry.
“Strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement. “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing.”
Currently the FDIC can only take back the compensation of executives at the largest banks in the nation, and other penalties on executives require “recklessness” or acting with “willful or continuing disregard” for their bank’s health. Biden wants Congress to allow the regulator to impose penalties for “negligent” executives — a lower legal threshold.
The White House highlighted reports that Silicon Valley Bank CEO Gregory Becker sold $3 million worth of shares in the bank in the days before its collapse, saying Biden wants the FDIC to have the authority to go after that compensation.
The shuttering of Silicon Valley Bank last Friday and of New York’s Signature Bank two days later has revived bad memories of the financial crisis that plunged the United States into the Great Recession about 15 years ago.
Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks’ deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.