A bill proposed by a House Democrat would require large banks to have a chief risk officer and notify relevant regulators when the position becomes vacant.
The “Chief Risk Officer Enforcement and Accountability Act,” introduced by Rep. Sean Casten (D-Ill.), was put forward this month as part of a wave of bills in response to recent banking turmoil in the United States that began with the collapse of Silicon Valley Bank (SVB).
SVB notably went eight months last year without a chief risk officer, after Laura Izurieta exited the role in April 2022. The company’s risk senior leadership held the responsibilities of the role until Kim Olson joined SVB in late December.
In March, SVB was shuttered by its regulators, who have placed blame on the bank for failing to effectively oversee the risks in its concentrated business model and high level of reliance on uninsured deposits.
“It was a clear mistake for Silicon Valley Bank to be without a chief risk officer … preceding its collapse, particularly for a bank that held a high percentage of uninsured deposits in historically less stable industries,” said Casten in a June 21 press release. “We need to prevent future banks from making the same errors. The Chief Risk Officer Enforcement and Accountability Act would rectify this by requiring banks with $50 billion or more in assets to retain a chief risk officer and notify their regulator if the position becomes vacant.”
The bill, according to the release, would amend the Financial Stability Act of 2010 by:
- Codifying Federal Reserve rules requiring large banks to have a chief risk officer;
- Requiring those banks to notify their regulator within 24 hours upon the risk chief position becoming vacant and provide a plan to fill the position within 60 days. If the bank fails to fill the position in time, it would be subject to a cap on asset growth until a qualified risk chief is hired; and
- Requiring the bank to notify the public the risk chief position is vacant after 60 days.
The bill (H.R.4062) has six Democratic cosponsors in the House, where Republicans currently have the majority.