,,ii ,calendar ,no4 #aae #aahth ,,congress #ast ,session ,s4 #baij ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,june #bb1 #bjbc,mr4 ,brown from the ,committee on ,banking1 ,housing1 and ,urban ,affairs1 reported the following original bill2 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 stability1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,recovering ,executive ,compensation ,obtained from ,unaccountable ,practices ,act of #bjbc or the ,,recoup ,act of #bjbc4 #b4 ,removal and prohibition authorities ,section #h7;e7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahah7;e77 is amended-- 7#a7 in paragraph 7#a7-- 7,a7 in subparagraph 7,a7-- 7i7 in clause 7ii71 by striking or at the end2 7ii7 in clause 7iii71 by inserting or at the end2 and 7iii7 by adding at the end the following3 7iv7 in the case of a senior executive1 as defined in paragraph 7#b77;,c71 failed to carry out the responsibilities of the senior executive for governance1 operations1 or risk or financial management of an insured depository institution or business institution2 2 7,b7 in subparagraph 7,b71 in the matter preceding clause 7i71 by inserting failure1 after practice12 and 7,c7 in subparagraph 7,c7-- 7i7 in the matter preceding clause 7i71 by inserting failure1 after practice12 and 7ii7 by striking clause 7ii7 and inserting the following3 7ii7 demonstrates-- 7,i7 willful or continuing disregard by such party for the safety or soundness of such insured depository institution or business institution2 or 7,,ii7 in the case of a senior executive1 as defined in paragraph 7#b77;,c71 gross negligence by such senior executive in the performance of the duties of the senior executive to the insured depository institution or business institution1 2 and 7#b7 in paragraph 7#b7-- 7,a7 in subparagraph 7,a7-- 7i7 in clause 7iii71 by striking or at the end2 7ii7 by redesignating clause 7iv7 as clause 7v72 and 7iii7 by inserting after clause 7iii7 the following3 7iv7 a senior executive of an insured depository institution has-- 7,i7 breached any fiduciary duty owed to the institution1 if the breach is determined to require grossly negligent1 reckless1 or willful conduct2 7,,ii7 failed to appropriately implement financial1 risk1 or supervisory reporting or information system or controls2 or 7,,iii7 having implemented a system or controls described in subclause 7,,ii71 has failed to oversee its operations2 or 2 and 7,b7 by adding at the end the following3 7,c7 ,definition ,in this paragraph1 the term senior executive means an individual who has oversight authority for managing the overall governance1 operations1 risk1 or finances of a depository institution or depository institution holding company1 including the president1 the chief executive officer1 the chief operating officer1 the chief financial officer1 the chief risk officer1 the chief legal officer1 the chairman of the board1 an inside director of the board of directors1 and an individual who occupies an equivalent position1 as determined by the depository institution or depository institution holding company1 as applicable4 4 #c4 ,governance and accountability standards ,the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahaa et seq47 is amended by adding at the end the following3 #ed4 ,governance and accountability standards 7a7 ,definition ,in this section1 the term senior executive has the meaning given the term in section #h7;e77#b77;,c74 7b7 ,adoption of standards ,except as provided in subsection 7d71 each depository institution and depository institution holding company shall adopt governance and accountability standards in the bylaws 7or their equivalents7 of the depository institution or depository institution holding company1 as applicable1 that promote safety and soundness1 responsiveness to supervisory matters1 and responsible management4 7c7 ,required contents 7#a7 ,in general ,the standards adopted under subsection 7b7 shall include-- 7,a7 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 matters1 including responding to the appropriate ,federal banking agency and ,state banking supervisor1 as applicable1 on supervisory matters on a timely basis2 7,b7 accountability and corporate governance mechanisms and controls such as-- 7i7 directing such senior executives and board of directors to implement reporting or information system or controls and oversee such systems appropriately and prudently2 7ii7 directing that management does not deviate from sound governance1 internal control1 or risk management2 and 7iii7 directing that appropriate long-term risk management be tailored to long-term economic conditions2 and 7,c7 except as provided in paragraph 7#b7 and subsection 7d71 in the event of the failure of the depository institution or depository institution holding company1 as applicable1 clawback authority that permits the board of directors of the depository institution or depository institution holding company 7or the equivalent71 or1 if the ,corporation has been appointed receiver or conservator of the depository institution1 the ,corporation1 in its capacity as receiver or conservator1 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-- 7i7 any bonus1 other incentive-based or equity-based compensation1 severance pay1 or golden parachute benefits received by that senior executive from the depository institution or depository institution holding company during the #bd-month period preceding the failure of the depository institution or depository institution holding company2 and 7ii7 any profits realized by that senior executive from the sale of securities of the entity during the #bd-month period described in clause 7i74 7#b7 ,exception ,paragraph 7#a77;,c7 shall not apply to any senior executive-- 7,a7 who has been employed by the depository institution or depository institution holding company for not more than #ah months before the date of the failure of the depository institution or depository institution holding company2 and 7,b7 whose conduct did not contribute to the failure of the depository institution or depository institution holding company1 as applicable4 7d7 ,exception ,this section shall not apply to a depository institution or depository institution holding company with total consolidated assets of not more than #aj1jjj1jjj1jjj4 4 #d4 ,cease-and-desist proceedings ,section #h7;b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahah7;b77 is amended by inserting after paragraph 7#h7 the following3 7#i7 ,recovery of compensation ,if the ,corporation is appointed receiver or conservator of an insured depository institution with total consolidated assets of more than #aj1jjj1jjj1jjj1 the ,corporation may recover for the receivership or conservatorship incentive-based compensation1 equity-based compensation1 severance pay1 golden parachute benefits1 or compensation that is granted or vested based wholly or in part upon the attainment of any financial reporting measure or other performance metric1 and any profits realized from the purchase or sale of securities of the depository institution or depository institution holding company during the #bd-month period preceding the failure of the insured depository institution from any senior executive1 as defined in subsection 7e77#b77;,c71 who is responsible for the failed condition of the depository institution or depository institution holding company4 4 #e4 ,civil money penalties ,section #h7;i77#b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahah7;i77#b77 is amended-- 7#a7 in subparagraph 7,c77i71 in the matter preceding subclause 7,i71 by inserting or1 in the case of a senior executive1 as defined in subsection 7e77#b77;,c71 recklessly after knowingly2 and 7#b7 in subparagraph 7,d77i71 by striking #a1jjj1jjj and inserting #c1jjj1jjj4 #f4 ,failed bank mergers and acquisitions 7a7 ,failed bank mergers ,section #ah7;c77#ac77;,b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbh7;c77#ac77;,b77 is amended by striking section #ac4 and inserting 8section #ac1 if-- 7i7 at the time the responsible agency proposes to approve the application1 there is no application or proposed application 7other than an application that also would be subject to the prohibition in subparagraph 7,a77 to acquire the #a or more insured depository institutions in default or in danger of default pending before any appropriate ,federal banking agency that would1 according to the responsible agency for such application1 meet all applicable standards for approval by the responsible agency2 7ii7 the ,corporation would provide assistance under section #ac with respect to the interstate merger transaction2 and 7iii7 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 acquire1 directly or indirectly1 the #a or more insured depository institutions in default or in danger of default pending before the ,corporation 7other than an interstate merger transaction that also would be subject to the prohibition in subparagraph 7,a77 that would permit the ,corporation to-- 7,i7 comply with the least-cost resolution requirements set forth in section #ac7;c77#d72 or 7,,ii7 avoid the serious adverse effects on economic conditions or financial stability that would occur absent exercise of the authority in section #ac7;c77#d77;,g71 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 application4 4 7b7 ,failed bank acquisitions ,section #c7;d77#e7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdb7;d77#e77 is amended-- 7#a7 by redesignating subparagraphs 7,a7 and 7,b7 as clauses 7i7 and 7ii71 respectively1 and adjusting the margins accordingly2 7#b7 in the matter preceding clause 7i71 as so redesignated1 by striking ,the ,board may approve and inserting the following3 7,a7 ,except as provided in subparagraph 7,b71 the ,board may approve 2 and 7#c7 by inserting at the end the following3 7,b7 ,notwithstanding subparagraph 7,a71 the ,board may approve an application that would otherwise be subject to the prohibition in subparagraph 7,a7 or 7,b7 of paragraph 7#b7 if-- 7i7 at the time the ,board proposes to approve the application1 there is no application or proposed application 7other than an application that also would be subject to the prohibitions in subparagraph 7,a7 or 7,b7 of paragraph 7#b77 to acquire1 directly or indirectly1 the #a or more banks in default or in danger of default1 or the acquisition with respect to which assistance is provided under section #ac7;c7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbc7;c771 pending before the ,board that would meet all applicable standards for approval under this section2 7ii7 the ,federal ,deposit ,insurance ,corporation would provide assistance under section #ac of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbc7 with respect to the acquisition that is the subject of the application to the ,board2 and 7iii7 the ,federal ,deposit ,insurance ,corporation has determined that the acquisition is the only proposed transaction to acquire1 directly or indirectly1 the #a or more banks in default or in danger of default pending before the ,corporation 7other than an acquisition that also would be subject to the prohibition in subparagraph 7,a7 or 7,b7 of paragraph 7#b77 that would permit the ,corporation to-- 7,i7 comply with the least-cost resolution requirements set forth in section #ac7;c77#d7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbc7;c77#d772 or 7,,ii7 avoid the serious adverse effects on economic conditions or financial stability that would occur absent exercise of the authority in section #ac7;c77#d77;,g7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbc7;c77#d77;,g771 if a systemic risk determination has been made under such section with respect to the bank or banks that are the subject of the application4 4 #g4 ,transparency relating to failed institutions 7a7 ,definitions ,in this section3 7#a7 ,appropriate federal banking agency2 depository institution ,the terms appropriate ,federal banking agency and depository institution have the meanings given the terms in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac74 7#b7 ,covered institution ,the term covered institution means a depository institution with more than #aj1jjj1jjj1jjj in total consolidated assets4 7b7 ,supervision review and public report ,not later than #ahj days 7or during a period of financial stress1 a reasonable time7 after the failure of a covered institution1 each appropriate ,federal banking agency shall complete a review of the management1 supervision1 and regulation of that institution and make publicly available a report detailing the findings of the agency4 #h4 ,federal ,reserve supervision and regulation report ,not less frequently than semiannually1 the ,board of ,governors of the ,federal ,reserve ,system shall make publicly available a report on-- 7#a7 the supervisory and regulatory policies and actions of the ,board2 7#b7 the current banking conditions2 and 7#c7 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 7#a71 including the frameworks1 strategies1 and metrics that the ,board is using to-- 7,a7 improve internal communication within the ,federal ,reserve ,system and with ,federal banking agencies and ,state banking supervisors2 7,b7 enhance the process by which the ,board solicits and receives public input2 and 7,c7 ensure timely1 appropriate1 and effective actions and communications are taken in response to supervisory concerns2 7#d7 the budgets1 staffing1 and any use of outside services to accomplish the items described in paragraph 7#c72 and 7#e7 the progress made for each of the metrics for each of the items described in paragraph 7#c74 #i4 ,reports and testimony 7a7 ,in general ,not later than #ahj days 7or during a period of financial stress1 a reasonable time7 after the appointment of the ,federal ,deposit ,insurance ,corporation as receiver or conservator of an insured depository institution with more than #aj1jjj1jjj1jjj in total consolidated assets1 as those terms are defined in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac71 the inspector general of the primary ,federal regulator of the insured depository institution or depository institution holding company1 including the ,board of ,governors of the ,federal ,reserve ,system1 shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report that includes-- 7#a7 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 company2 7#b7 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 company2 7#c7 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 company2 and 7#d7 an identification of the causes of the failure of the insured depository institution or depository institution holding company1 including actions or omissions by both the primary ,federal regulator and management of the insured depository institution or depository institution holding company4 7b7 ,testimony ,not later than #cj days after the date on which the report required under subsection 7a7 is received1 the inspector general of the primary ,federal regulator shall be available to testify before the committees described in subsection 7a74 #aj4 ,sense of ,congress ,it is the ,sense of ,congress that-- 7#a7 the financial system of the ,united ,states is strong and resilient1 and the vast majority of the financial institutions in the ,united ,states are well managed2 7#b7 in order to ensure the financial system of the ,united ,states remains strong and resilient1 mismanagement by senior executives must be deterred2 7#c7 financial regulators should operate in an appropriate and transparent manner2 and 7#d7 this ,act and the amendments made by this ,act should not be used to penalize senior executives of healthy financial institutions that are appropriately managed4 #aa4 ,rule of construction ,except as otherwise specifically provided herein1 nothing in this ,act1 or the amendments made by this ,act1 may be construed to amend or alter the authority of the ,federal ,deposit ,insurance ,corporation or any other appropriate ,federal banking agency1 as defined in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac74 ,june #bb1 #bjbc,read twice and placed on the calendar