Stopping Bonuses for Unsafe and Unsound Banking Act

Bill Number

H.R. 6705

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2025-12-15: Referred to the House Committee on Financial Services.

Last Updated

2026-01-08T19:42:26Z

AI-Generated Summary

Purpose

The "Stopping Bonuses for Unsafe and Unsound Banking Act" (H.R. 6705) aims to promote accountability and safety in large U.S. banking institutions by restricting discretionary bonus payments to senior executives when the bank faces serious regulatory concerns. It encourages banks to promptly address issues identified by federal regulators to avoid financial penalties on executive compensation.

Key Provisions

• Prohibition on Bonuses: If a federal banking agency issues a "matter requiring immediate attention" (MRIA)—a formal notice highlighting a serious problem that needs urgent fixes—a covered banking institution cannot pay discretionary bonuses (non-guaranteed performance-based rewards) to senior executive officers until the issue is fully resolved to the agency's satisfaction.
• Exception for Remediation Efforts:
• The ban does not apply during the initial period after receiving the MRIA, up to the deadline for submitting a remediation plan (a detailed strategy to fix the problem, including a timeline for implementation).
• If the agency accepts the plan by the deadline, bonuses can resume during the plan's implementation period, but the ban returns if the issue remains unresolved afterward.
• Scope of Coverage:
• Applies to "covered banking institutions," defined as:
• Bank holding companies (parent companies owning banks) with over $50 billion in total assets.
• Bank subsidiaries of such holding companies.
• Standalone banks (not owned by a holding company) with over $50 billion in assets.
• Terms like "appropriate Federal banking agency" (e.g., Federal Reserve, FDIC, or OCC, depending on the bank type), "bank," and "bank holding company" follow standard definitions under the Federal Deposit Insurance Act.

Significant Changes to Existing Law

This bill introduces a new restriction on executive compensation tied directly to regulatory compliance, which does not exist in current U.S. banking laws. Previously, federal agencies could issue MRIAs and require fixes but lacked authority to automatically freeze bonuses. It builds on post-2008 financial crisis reforms (like the Dodd-Frank Act) by adding a specific incentive mechanism to enforce remediation without needing broader enforcement actions like fines.

Potential Impacts

• On Government Agencies: Enhances tools for federal banking regulators to enforce compliance more effectively, potentially reducing the need for costlier interventions (e.g., formal enforcement orders). It may increase agency workload in reviewing and approving remediation plans.
• On Citizens: Could lead to a safer banking system by pressuring large banks to resolve risks quickly, potentially lowering the chance of financial instability that affects depositors, borrowers, or the broader economy (e.g., preventing issues like those in the 2008 crisis).
• On International Relations: Minimal direct impact, though it may indirectly strengthen U.S. financial stability, influencing global investor confidence in American banks with international operations.
• No explicit effects on smaller banks (under $50 billion in assets), focusing enforcement on systemically important institutions.

Main Stakeholders

• Large Banking Institutions: Directly restricted in paying bonuses, facing operational and financial pressures to address regulatory issues swiftly.
• Senior Executive Officers: Delayed or withheld compensation, incentivizing personal accountability for compliance.
• Federal Banking Agencies: Gain enforcement leverage (e.g., Federal Reserve for holding companies, FDIC for insured banks, OCC for national banks) to oversee remediation.
• Bank Shareholders and Employees: Indirectly affected through potential impacts on bank performance and morale, though non-executive staff bonuses are not targeted.
• General Public and Economy: Benefit from reduced systemic risks in major banks that handle a significant portion of U.S. deposits and lending.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens regulatory authority under existing banking statutes without altering core deposit insurance or supervision frameworks; could face challenges if viewed as overreach into private contracts (e.g., executive pay agreements), though it aligns with precedent for clawbacks and deferrals in Dodd-Frank. Courts might review if "discretionary bonuses" is narrowly defined to avoid broader compensation interference.
• Constitutional: No major issues anticipated, as it regulates interstate commerce in banking (a field of established federal power under the Commerce Clause); does not infringe on free speech or due process, given procedural exceptions for remediation.
• Political: Reflects bipartisan concerns over "too big to fail" banks post-recent failures (e.g., 2023 regional bank collapses), emphasizing executive accountability. It may appeal to populists critiquing Wall Street pay but could draw opposition from banking lobbies arguing it hampers talent retention or competitiveness. As an introduced bill (December 15, 2025), its passage would signal tougher oversight in the 119th Congress.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Pettersen, Brittany [D-CO-7]

Recent Actions

• 2025-12-15: Referred to the House Committee on Financial Services.
• 2025-12-15: Introduced in House
• 2025-12-15: Introduced in House

Bill Versions

• Stopping Bonuses for Unsafe and Unsound Banking Act — issued 2025-12-15 — PDF (3 pages)