President Joe Biden is calling on Congress to “do more to hold senior bank executives accountable” since the market turmoil that has followed the collapses of Silicon Valley Bank (SVB) and Signature Bank.
The White House published a fact sheet Friday reflecting Biden’s desire to see lawmakers grant regulators, namely the Federal Deposit Insurance Corporation, the power to recoup compensation from senior managers when their banks fail and enter FDIC receivership.
“[W]hen banks fail because of mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again,” the White House said.
Currently, the Dodd-Frank Act allows the FDIC clawback authority applicable to only the largest financial institutions. The White House suggested the provision should be extended to apply to “banks the size of Silicon Valley Bank and Signature Bank.”
Biden would also like the FDIC to be able to bar banking executives from holding jobs in the industry when their banks enter receivership and “seek fines from negligent executives of failed banks when their actions contribute to the failure of their firms.”
Such authority could play out similar to the actions banking regulators took against former Wells Fargo executives in the aftermath of its fake accounts scandal. Last week, the Treasury Department’s Office of the Comptroller of the Currency fined former Wells Fargo Community Bank head Carrie Tolstedt $17 million and banned her from the banking industry for her alleged role in the scandal.
The White House cited the reported gains the former chief executive officer of SVB earned from stock sales prior to its collapse as justification for lawmakers to address the issue. The Department of Justice and Securities and Exchange Commission are reportedly investigating such actions by SVB’s executives.
The FDIC is still looking for a buyer of SVB. Signature Bank’s deposits have largely been taken on by Flagstar Bank, a wholly owned subsidiary of New York Community Bancorp, as of Monday, the agency announced.