Failed Bank Executives Accountability and Consequences Act
- Bill Number
- H.R. 7886
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2026-03-09: Referred to the House Committee on Financial Services.
- Last Updated
- 2026-05-02T19:06:20Z
AI-Generated Summary
Summary of H.R. 7886: Failed Bank Executives Accountability and Consequences Act
Purpose
This legislation aims to strengthen federal oversight of executives at failed financial institutions by granting regulators new tools to recover compensation, impose bans on future participation, and assess civil penalties when negligence leads to bank failures.
Key Provisions
- Sense of Congress (Section 2): Expresses that regulators should fully use existing powers to hold executives at banks such as Silicon Valley Bank, Signature Bank, and First Republic Bank accountable. It also urges the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration, Securities and Exchange Commission, and Federal Housing Finance Agency to finalize rules under section 956 of the Investor Protection and Securities Reform Act of 2010, including strong clawback requirements.
- Clawback Authority (Section 3): Amends the Federal Deposit Insurance Act to allow the FDIC, acting as conservator or receiver, to recover compensation from current or former executives and directors whose negligence caused losses. The recovery covers the two years before the appointment as conservator or receiver, with no time limit in cases of fraud. Compensation is defined to include salary, bonuses, incentives, benefits, severance, deferred pay, golden parachutes, and profits from securities sales. A similar amendment applies to the Dodd-Frank Wall Street Reform and Consumer Protection Act for orderly liquidations.
- Removal and Prohibition Authority (Section 4): Adds provisions to the Federal Deposit Insurance Act allowing regulators to prohibit an executive or director from participating in any insured depository institution if their negligence caused a failure. Conforming changes update references in related sections.
- Civil Penalties (Section 5): Introduces new penalty tiers under the Federal Deposit Insurance Act. Negligent executives face fines up to $25,000 per day. Knowingly or recklessly acting executives face higher penalties aligned with existing maximums. Updates to related subsections ensure consistency.
- Rule of Construction (Section 6): Clarifies that the Act does not restrict regulators' or law enforcement's pre-existing enforcement powers.
Significant Changes to Existing Law
- Introduces explicit clawback mechanisms for executive compensation tied to negligence in failed institutions, expanding beyond prior authorities.
- Creates a new category for removal and industry-wide bans specifically linked to causing institutional failure through negligence.
- Establishes dedicated civil money penalty structures for executives contributing to bank failures, with tiered amounts based on the level of fault.
Potential Impacts
- Government Agencies: Enhances the FDIC's and other federal banking agencies' enforcement capabilities, requiring new rulemaking for implementation.
- Citizens: May increase accountability for bank leadership, potentially reducing risks to depositors and the Deposit Insurance Fund, though effects on taxpayers depend on successful recoveries.
- International Relations: No direct provisions address foreign entities, but the measures could influence oversight of U.S. operations of international banks.
Main Stakeholders Affected
- Current and former executive officers and directors of insured depository institutions.
- Failed banks and their affiliates.
- Federal regulators, including the FDIC, Federal Reserve, Office of the Comptroller of the Currency, and others.
- The broader banking industry and insured depository institutions.
Notable Legal, Constitutional, or Political Implications
- Expands administrative enforcement powers without apparent limits on existing authorities, focusing on negligence as a basis for action.
- Raises potential questions about due process in applying new penalties and bans, though the bill emphasizes alignment with current frameworks.
- Politically targets accountability in recent high-profile bank failures while preserving regulatory flexibility.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Recent Actions
- 2026-03-09: Referred to the House Committee on Financial Services.
- 2026-03-09: Introduced in House
- 2026-03-09: Introduced in House
Bill Versions
- Failed Bank Executives Accountability and Consequences Act — issued 2026-03-09 — PDF (8 pages)