[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2190 Reported in Senate (RS)]

<DOC>





                                                       Calendar No. 115
118th CONGRESS
  1st Session
                                S. 2190

 To amend the Federal Deposit Insurance Act to increase bank executive 
   accountability and to improve financial stability, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 22, 2023

 Mr. Brown from the Committee on Banking, Housing, and Urban Affairs, 
 reported the following original bill; which was read twice and placed 
                            on the calendar

_______________________________________________________________________

                                 A BILL


 
 To amend the Federal Deposit Insurance Act to increase bank executive 
   accountability and to improve financial stability, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Recovering Executive Compensation 
Obtained from Unaccountable Practices Act of 2023'' or the ``RECOUP Act 
of 2023''.

SEC. 2. REMOVAL AND PROHIBITION AUTHORITIES.

    Section 8(e) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(e)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A)--
                            (i) in clause (ii), by striking ``or'' at 
                        the end;
                            (ii) in clause (iii), by inserting ``or'' 
                        at the end; and
                            (iii) by adding at the end the following:
                            ``(iv) in the case of a senior executive, 
                        as defined in paragraph (2)(C), failed to carry 
                        out the responsibilities of the senior 
                        executive for governance, operations, or risk 
                        or financial management of an insured 
                        depository institution or business 
                        institution;'';
                    (B) in subparagraph (B), in the matter preceding 
                clause (i), by inserting ``failure,'' after 
                ``practice,''; and
                    (C) in subparagraph (C)--
                            (i) in the matter preceding clause (i), by 
                        inserting ``failure,'' after ``practice,''; and
                            (ii) by striking clause (ii) and inserting 
                        the following:
                            ``(ii) demonstrates--
                                    ``(I) willful or continuing 
                                disregard by such party for the safety 
                                or soundness of such insured depository 
                                institution or business institution; or
                                    ``(II) in the case of a senior 
                                executive, as defined in paragraph 
                                (2)(C), gross negligence by such senior 
                                executive in the performance of the 
                                duties of the senior executive to the 
                                insured depository institution or 
                                business institution,''; and
            (2) in paragraph (2)--
                    (A) in subparagraph (A)--
                            (i) in clause (iii), by striking ``or'' at 
                        the end;
                            (ii) by redesignating clause (iv) as clause 
                        (v); and
                            (iii) by inserting after clause (iii) the 
                        following:
                            ``(iv) a senior executive of an insured 
                        depository institution has--
                                    ``(I) breached any fiduciary duty 
                                owed to the institution, if the breach 
                                is determined to require grossly 
                                negligent, reckless, or willful 
                                conduct;
                                    ``(II) failed to appropriately 
                                implement financial, risk, or 
                                supervisory reporting or information 
                                system or controls; or
                                    ``(III) having implemented a system 
                                or controls described in subclause 
                                (II), has failed to oversee its 
                                operations; or''; and
                    (B) by adding at the end the following:
                    ``(C) Definition.--In this paragraph, the term 
                `senior executive' means an individual who has 
                oversight authority for managing the overall 
                governance, operations, risk, or finances of a 
                depository institution or depository institution 
                holding company, including the president, the chief 
                executive officer, the chief operating officer, the 
                chief financial officer, the chief risk officer, the 
                chief legal officer, the chairman of the board, an 
                inside director of the board of directors, and an 
                individual who occupies an equivalent position, as 
                determined by the depository institution or depository 
                institution holding company, as applicable.''.

SEC. 3. GOVERNANCE AND ACCOUNTABILITY STANDARDS.

    The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
amended by adding at the end the following:

``SEC. 54. GOVERNANCE AND ACCOUNTABILITY STANDARDS.

    ``(a) Definition.--In this section, the term `senior executive' has 
the meaning given the term in section 8(e)(2)(C).
    ``(b) Adoption of Standards.--Except as provided in subsection (d), 
each depository institution and depository institution holding company 
shall adopt governance and accountability standards in the bylaws (or 
their equivalents) of the depository institution or depository 
institution holding company, as applicable, that promote safety and 
soundness, responsiveness to supervisory matters, and responsible 
management.
    ``(c) Required Contents.--
            ``(1) In general.--The standards adopted under subsection 
        (b) shall include--
                    ``(A) policies for senior executives and members of 
                the board of directors of the depository institution or 
                depository institution holding company relating to 
                appropriate risk management and responsiveness to 
                supervisory matters, including responding to the 
                appropriate Federal banking agency and State banking 
                supervisor, as applicable, on supervisory matters on a 
                timely basis;
                    ``(B) accountability and corporate governance 
                mechanisms and controls such as--
                            ``(i) directing such senior executives and 
                        board of directors to implement reporting or 
                        information system or controls and oversee such 
                        systems appropriately and prudently;
                            ``(ii) directing that management does not 
                        deviate from sound governance, internal 
                        control, or risk management; and
                            ``(iii) directing that appropriate long-
                        term risk management be tailored to long-term 
                        economic conditions; and
                    ``(C) except as provided in paragraph (2) and 
                subsection (d), in the event of the failure of the 
                depository institution or depository institution 
                holding company, as applicable, clawback authority that 
                permits the board of directors of the depository 
                institution or depository institution holding company 
                (or the equivalent), or, if the Corporation has been 
                appointed receiver or conservator of the depository 
                institution, the Corporation, in its capacity as 
                receiver or conservator, to recover from a senior 
                executive of the depository institution or depository 
                institution holding company who is responsible for the 
                failed condition of the depository institution or 
                depository institution holding company--
                            ``(i) any bonus, other incentive-based or 
                        equity-based compensation, severance pay, or 
                        golden parachute benefits received by that 
                        senior executive from the depository 
                        institution or depository institution holding 
                        company during the 24-month period preceding 
                        the failure of the depository institution or 
                        depository institution holding company; and
                            ``(ii) any profits realized by that senior 
                        executive from the sale of securities of the 
                        entity during the 24-month period described in 
                        clause (i).
            ``(2) Exception.--Paragraph (1)(C) shall not apply to any 
        senior executive--
                    ``(A) who has been employed by the depository 
                institution or depository institution holding company 
                for not more than 18 months before the date of the 
                failure of the depository institution or depository 
                institution holding company; and
                    ``(B) whose conduct did not contribute to the 
                failure of the depository institution or depository 
                institution holding company, as applicable.
    ``(d) Exception.--This section shall not apply to a depository 
institution or depository institution holding company with total 
consolidated assets of not more than $10,000,000,000.''.

SEC. 4. CEASE-AND-DESIST PROCEEDINGS.

    Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(b)) is amended by inserting after paragraph (8) the following:
            ``(9) Recovery of compensation.--If the Corporation is 
        appointed receiver or conservator of an insured depository 
        institution with total consolidated assets of more than 
        $10,000,000,000, the Corporation may recover for the 
        receivership or conservatorship incentive-based compensation, 
        equity-based compensation, severance pay, golden parachute 
        benefits, or compensation that is granted or vested based 
        wholly or in part upon the attainment of any financial 
        reporting measure or other performance metric, and any profits 
        realized from the purchase or sale of securities of the 
        depository institution or depository institution holding 
        company during the 24-month period preceding the failure of the 
        insured depository institution from any senior executive, as 
        defined in subsection (e)(2)(C), who is responsible for the 
        failed condition of the depository institution or depository 
        institution holding company.''.

SEC. 5. CIVIL MONEY PENALTIES.

    Section 8(i)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(i)(2)) is amended--
            (1) in subparagraph (C)(i), in the matter preceding 
        subclause (I), by inserting ``or, in the case of a senior 
        executive, as defined in subsection (e)(2)(C), recklessly'' 
        after ``knowingly''; and
            (2) in subparagraph (D)(i), by striking ``$1,000,000'' and 
        inserting ``$3,000,000''.

SEC. 6. FAILED BANK MERGERS AND ACQUISITIONS.

    (a) Failed Bank Mergers.--Section 18(c)(13)(B) of the Federal 
Deposit Insurance Act (12 U.S.C. 1828(c)(13)(B)) is amended by striking 
``section 13.'' and inserting ``section 13, if--
            ``(i) at the time the responsible agency proposes to 
        approve the application, there is no application or proposed 
        application (other than an application that also would be 
        subject to the prohibition in subparagraph (A)) to acquire the 
        1 or more insured depository institutions in default or in 
        danger of default pending before any appropriate Federal 
        banking agency that would, according to the responsible agency 
        for such application, meet all applicable standards for 
        approval by the responsible agency;
            ``(ii) the Corporation would provide assistance under 
        section 13 with respect to the interstate merger transaction; 
        and
            ``(iii) the Corporation has determined that the interstate 
        merger transaction that is the subject of the application to 
        the responsible agency is the only proposed transaction to 
        acquire, directly or indirectly, the 1 or more insured 
        depository institutions in default or in danger of default 
        pending before the Corporation (other than an interstate merger 
        transaction that also would be subject to the prohibition in 
        subparagraph (A)) that would permit the Corporation to--
                    ``(I) comply with the least-cost resolution 
                requirements set forth in section 13(c)(4); or
                    ``(II) avoid the serious adverse effects on 
                economic conditions or financial stability that would 
                occur absent exercise of the authority in section 
                13(c)(4)(G), if a systemic risk determination has been 
                made under such section with respect to the insured 
                depository institution or institutions that are the 
                subject of the application.''.
    (b) Failed Bank Acquisitions.--Section 3(d)(5) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1842(d)(5)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively, and adjusting the margins 
        accordingly;
            (2) in the matter preceding clause (i), as so redesignated, 
        by striking ``The Board may approve'' and inserting the 
        following:
                    ``(A) Except as provided in subparagraph (B), the 
                Board may approve''; and
            (3) by inserting at the end the following:
                    ``(B) Notwithstanding subparagraph (A), the Board 
                may approve an application that would otherwise be 
                subject to the prohibition in subparagraph (A) or (B) 
                of paragraph (2) if--
                            ``(i) at the time the Board proposes to 
                        approve the application, there is no 
                        application or proposed application (other than 
                        an application that also would be subject to 
                        the prohibitions in subparagraph (A) or (B) of 
                        paragraph (2)) to acquire, directly or 
                        indirectly, the 1 or more banks in default or 
                        in danger of default, or the acquisition with 
                        respect to which assistance is provided under 
                        section 13(c) of the Federal Deposit Insurance 
                        Act (12 U.S.C. 1823(c)), pending before the 
                        Board that would meet all applicable standards 
                        for approval under this section;
                            ``(ii) the Federal Deposit Insurance 
                        Corporation would provide assistance under 
                        section 13 of the Federal Deposit Insurance Act 
                        (12 U.S.C. 1823) with respect to the 
                        acquisition that is the subject of the 
                        application to the Board; and
                            ``(iii) the Federal Deposit Insurance 
                        Corporation has determined that the acquisition 
                        is the only proposed transaction to acquire, 
                        directly or indirectly, the 1 or more banks in 
                        default or in danger of default pending before 
                        the Corporation (other than an acquisition that 
                        also would be subject to the prohibition in 
                        subparagraph (A) or (B) of paragraph (2)) that 
                        would permit the Corporation to--
                                    ``(I) comply with the least-cost 
                                resolution requirements set forth in 
                                section 13(c)(4) of the Federal Deposit 
                                Insurance Act (12 U.S.C. 1823(c)(4)); 
                                or
                                    ``(II) avoid the serious adverse 
                                effects on economic conditions or 
                                financial stability that would occur 
                                absent exercise of the authority in 
                                section 13(c)(4)(G) of the Federal 
                                Deposit Insurance Act (12 U.S.C. 
                                1823(c)(4)(G)), if a systemic risk 
                                determination has been made under such 
                                section with respect to the bank or 
                                banks that are the subject of the 
                                application.''.

SEC. 7. TRANSPARENCY RELATING TO FAILED INSTITUTIONS.

    (a) Definitions.--In this section:
            (1) Appropriate federal banking agency; depository 
        institution.--The terms ``appropriate Federal banking agency'' 
        and ``depository institution'' have the meanings given the 
        terms in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813).
            (2) Covered institution.--The term ``covered institution'' 
        means a depository institution with more than $10,000,000,000 
        in total consolidated assets.
    (b) Supervision Review and Public Report.--Not later than 180 days 
(or during a period of financial stress, a reasonable time) after the 
failure of a covered institution, each appropriate Federal banking 
agency shall complete a review of the management, supervision, and 
regulation of that institution and make publicly available a report 
detailing the findings of the agency.

SEC. 8. FEDERAL RESERVE SUPERVISION AND REGULATION REPORT.

    Not less frequently than semiannually, the Board of Governors of 
the Federal Reserve System shall make publicly available a report on--
            (1) the supervisory and regulatory policies and actions of 
        the Board;
            (2) the current banking conditions; and
            (3) any internal changes the Board is making to the 
        operations and culture of the Board with respect to the 
        supervisory and regulatory actions described in paragraph (1), 
        including the frameworks, strategies, and metrics that the 
        Board is using to--
                    (A) improve internal communication within the 
                Federal Reserve System and with Federal banking 
                agencies and State banking supervisors;
                    (B) enhance the process by which the Board solicits 
                and receives public input; and
                    (C) ensure timely, appropriate, and effective 
                actions and communications are taken in response to 
                supervisory concerns;
            (4) the budgets, staffing, and any use of outside services 
        to accomplish the items described in paragraph (3); and
            (5) the progress made for each of the metrics for each of 
        the items described in paragraph (3).

SEC. 9. REPORTS AND TESTIMONY.

    (a) In General.--Not later than 180 days (or during a period of 
financial stress, a reasonable time) after the appointment of the 
Federal Deposit Insurance Corporation as receiver or conservator of an 
insured depository institution with more than $10,000,000,000 in total 
consolidated assets, as those terms are defined in section 3 of the 
Federal Deposit Insurance Act (12 U.S.C. 1813), the inspector general 
of the primary Federal regulator of the insured depository institution 
or depository institution holding company, including the Board of 
Governors of the Federal Reserve System, shall submit to the Committee 
on Banking, Housing, and Urban Affairs of the Senate and the Committee 
on Financial Services of the House of Representatives a report that 
includes--
            (1) an evaluation of the effectiveness of the primary 
        Federal regulator in carrying out its supervisory 
        responsibilities with respect to the insured depository 
        institution or depository institution holding company;
            (2) an identification of any acts or omissions on the part 
        of officials of the primary Federal regulator that contributed 
        to the failure of the insured depository institution or 
        depository institution holding company;
            (3) an identification of any actions that could have been 
        taken by the primary Federal regulator that would have 
        prevented the failure of the insured depository institution or 
        depository institution holding company; and
            (4) an identification of the causes of the failure of the 
        insured depository institution or depository institution 
        holding company, including actions or omissions by both the 
        primary Federal regulator and management of the insured 
        depository institution or depository institution holding 
        company.
    (b) Testimony.--Not later than 30 days after the date on which the 
report required under subsection (a) is received, the inspector general 
of the primary Federal regulator shall be available to testify before 
the committees described in subsection (a).

SEC. 10. SENSE OF CONGRESS.

    It is the Sense of Congress that--
            (1) the financial system of the United States is strong and 
        resilient, and the vast majority of the financial institutions 
        in the United States are well managed;
            (2) in order to ensure the financial system of the United 
        States remains strong and resilient, mismanagement by senior 
        executives must be deterred;
            (3) financial regulators should operate in an appropriate 
        and transparent manner; and
            (4) this Act and the amendments made by this Act should not 
        be used to penalize senior executives of healthy financial 
        institutions that are appropriately managed.

SEC. 11. RULE OF CONSTRUCTION.

    Except as otherwise specifically provided herein, nothing in this 
Act, or the amendments made by this Act, may be construed to amend or 
alter the authority of the Federal Deposit Insurance Corporation or any 
other appropriate Federal banking agency, as defined in section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813).
                                                       Calendar No. 115

118th CONGRESS

  1st Session

                                S. 2190

_______________________________________________________________________

                                 A BILL

 To amend the Federal Deposit Insurance Act to increase bank executive 
   accountability and to improve financial stability, and for other 
                               purposes.

_______________________________________________________________________

                             June 22, 2023

                 Read twice and placed on the calendar