WASHINGTON — House Democrats on Tuesday will unveil a package of reform bills in response to recent bank failures that sparked the industry’s worst crisis since 2008.
Members of the House Financial Services Committee, led by Rep. Maxine Waters (D-Calif.), are seeking to expand the reach of the federal regulator and increase oversight of bank executives, including compensating compensation, fines and filling allowable Loopholes Some banks evade standards established under the 2010 Dodd-Frank Act.
The committee closely scrutinized the actions of the Treasury Department, the Federal Deposit Insurance Corporation (FDIC) and other federal regulators, as well as executives at Silicon Valley Bank and Signature Bank before and after the banks’ collapse.
Waters urged committee Republicans to follow the example of the Senate Banking Committee and work with Democrats to advance bipartisan legislation to protect the economy from future harm.
“The failures of Silicon Valley Bank, Signature Bank and First Republic Bank clearly demonstrate that legislation designed to strengthen the safety and soundness of our banking system and to increase the accountability of bank executives is behind us,” she said.
Here are the bills to consider:
Failed Bank Executive Liability and Consequences Act: The bill would expand regulatory powers to compensate kickbacks, fines and bar executives who caused bank failures from working in the industry in the future.president biden call for these actions Shortly after the FDIC took over SVB and Signature Bank in March. The bill was co-sponsored by Waters and Rep. Nydia Velazquez, Democrats of New York; Brad Sherman and Juan Vargas of California; David Scott of Georgia; Al Green and Sylvia Garrett of Texas. West Asia; Emanuel Cleaver of Missouri State; Joyce Beatty and Steven Horsford, both of Ohio State; and Rashida Tlaib of Michigan State. Some Republicans have expressed support for the bill, which is similar to a bipartisan bill being considered by the Senate Banking Committee.
Incentives for safe and sound banking laws: The measure would expand regulators’ powers to bar executives from selling shares when a bank is issued a cease and desist order for breaking the law. It would also automatically limit the sale of shares by senior bank executives with poor test ratings or who do not meet regulatory requirements. According to Democrats, the bill would prevent SVB bank executives from cashing out after repeated warnings from regulators. It is co-sponsored by Waters, Velazquez, Sherman, Green, Cleaver, Beatty, Horsford and Tlaib.
Closing the Enhanced Prudential Standards Loophole Act: That would aim to close the loophole surrounding Dodd-Frank’s higher prudential standards for banks without bank holding companies. Neither Signature Bank nor SVB had bank holding companies prior to their collapse. The bill will ensure that large banks of the same size, complexity and risk as those with holding companies will be subject to similar enhanced capital, liquidity, stress testing, resolution planning and other related requirements. It is co-sponsored by Waters, Velazquez, Sherman, Green, Cleaver, Beatty, Vargas, Garcia and Tlaib.
HR 4204, Protecting Community Banks from the Systemic Risk Assessment Act: The measure would permanently exempt banks with less than $5 billion in total assets from special assessments collected by the FDIC when the systemic risk exception is triggered, in an effort to protect depositors at Silicon Valley Bank and Signature Bank. The FDIC would be allowed to set a higher bar while requiring minimal impact on banks with total assets between $5 billion and $50 billion. It is sponsored by Greene.
HR 4062Chief Risk Officer Enforcement and Accountability Act: The measure would see federal regulators require large banks to have a chief risk officer. Banks must also notify federal and state regulators of CRO vacancies within 24 hours and provide hiring plans within seven days. After 60 days, if the CRO position remains vacant, the bank must notify the public and is automatically subject to an asset growth cap until the position is filled. The bill was co-sponsored by Sherman, Green and Democratic Rep. Sean Carsten of Illinois; Josh Gottheimer of New Jersey; Ritchie Torres of New York; and Wiley Nickel of North Carolina.
HR 3914Failed Bank Takeover Fairness Act: The bill would have the FDIC consider bids only from large banks with more than 10% of total deposits if no other agency meets the minimum cost test. According to Democrats, this would ensure that smaller banks have the opportunity to buy up failing banks. It is sponsored by Rep. Stephen Lynch, D-Mass.
Human Resources 3992Effective Banking Supervision Act: This legislation will Ask regulators to expand stress testing requirements. The bill would call for five, not two, stress test scenarios. It will also ensure that the Fed conducts stress tests of rising or falling interest rates. It is sponsored by Sherman.
Human Resources 4116Systemic Risk Authority Transparency Act: The bill would require regulators and the regulator, the Government Accountability Office (GAO), to provide the same type of post-failure reporting that the Federal Reserve, FDIC, and GAO did after Silicon Valley Bank and Signature Bank collapsed. An initial report is required within 60 days and a comprehensive report within 180 days. It applies to any use of the systemic risk exception to the FDIC’s minimum cost resolution test. The bill was sponsored by Green.
Human Resources 4200Promoting accountability in the Remuneration Fund Act 2023 or the Equity Fund Act: The legislation would require large financial institutions to pay penalties incurred following failure and/or executive conduct through a deferred compensation pool that would be funded in part from executive compensation. The pool of funds will be paid out over two to eight years, depending on the size of the institution. The bill was sponsored by Tlaib.
Bonuses stopped due to unsafe and unsound banking practices: The measure would freeze the bonuses of any top bank executives if they did not submit an acceptable remediation plan for a so-called matter requiring immediate attention, or MRIA, or similar citation from the banking regulator, by a deadline set by the regulator. It is sponsored by D-Colo’s Brittany Pettersen.
Bank Security Act: Under the Act, large banks will not be able to choose not to recognize the requirement to recognize accumulated other comprehensive income (AOCI) in regulatory capital. AOCI reflects the type of unrealized losses in SVB’s securities portfolio. It is sponsored by Sherman.