House Financial Services Committee Marks Up Democratic Bills Aimed at Addressing Bank Failures

The House Financial Services Committee marked up legislation offered by Democrats to advance targeted banking reforms in response to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank.

Ranking Member Maxine Waters stated that the measures were intended "to strengthen the safety and soundness of the banking system, protect community banks, and enhance bank executive accountability." Congresswoman Waters urged Committee Republicans to work with Democrats "to quickly advance these much needed reforms in order to protect our banking system, economy, and our nation’s consumers from any future harm."

Among other things, the legislation proposed by the minority members on the Committee included:

• H.R. 4208, Failed Bank Executives Accountability and Consequences Act would increase regulatory authority to clawback compensation, impose fines, and ban executives from the banking industry if the executives "negligently contributed to their bank’s failures";
• H.R. 4209, Incentivizing Safe and Sound Banking Act would increase bank regulators' authority to (i) prohibit stock sales of bank executives when issuing a cease-and-desist order to a bank and (ii) automatically restrict stock sales by senior executives of large banks in instances where the banks receive a poor exam rating;
• H.R. 4210, Closing the Enhanced Prudential Standards Loophole Act would subject large banks to increased capital, liquidity, stress testing, resolution planning and other related requirements;
• H.R. 3992, Effective Bank Regulation Act would require bank regulators to expand their stress testing requirements;
• H.R. 4206, Bank Safety Act would require banks to take account of unrealized losses in their securities portfolios;
• H.R. 4116, Systemic Risk Authority Transparency Act would require banking regulators and the GAO to submit similar reports as was produced following the failures of Signature and SVB;
• H.R. 4062, Chief Risk Officer Enforcement and Accountability Act would codify current regulatory requirements that large banks have a Chief Risk Officer; and
• H.R. 4207, Stopping Bonuses for Unsafe and Unsound Banking Act would restrict discretionary bonus payments to executives of any large bank that does not resolve a supervisory citation from a bank supervisor in a timely manner.

The Senate Committee on Banking, Housing, and Urban Affairs said that it will mark up the Recovering Executive Compensation Obtained from Unaccountable Practices (RECOUP) Act, a bill similar to the Failed Bank Executives Accountability and Consequences Act (see above).