Incentivizing Safe and Sound Banking Act
- Bill Number
- H.R. 7887
- 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
- 2026-04-06T15:49:23Z
AI-Generated Summary
Summary of H.R. 7887: Incentivizing Safe and Sound Banking Act
Purpose
This legislation aims to restrict senior bank executives from selling shares of their institution or its affiliates that they received as compensation, specifically when the bank faces regulatory concerns or poor performance ratings. The goal is to encourage safer banking practices by limiting executives' ability to exit positions during periods of instability.
Key Provisions
- Expanded regulatory authority: Regulators may include a prohibition on selling compensated securities in cease-and-desist orders issued to insured banks or their affiliates, covering current or former officers, directors, or related parties.
- Automatic stock sale ban: If a large bank receives a composite or component rating of 3, 4, or 5 under the Uniform Financial Institutions Rating System (a standard used by regulators to evaluate bank safety and soundness) or a "matter requiring immediate attention" notice, and fails to address the issue by the required deadline, senior executives cannot sell their compensated securities until the matter is resolved.
- Definition of covered institutions: The automatic ban applies only to bank holding companies, their subsidiaries, or standalone banks with more than $50 billion in assets.
Significant Changes to Existing Law
- Amends Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) by adding new language to subsection (b) on cease-and-desist powers and creating a new subsection (x) for automatic prohibitions.
- Introduces automatic triggers tied to supervisory ratings and notices, which were not previously part of this section of the law.
Potential Impacts
- On government agencies: Strengthens the tools available to federal banking regulators for overseeing large institutions, potentially requiring more monitoring and enforcement actions.
- On citizens: May indirectly benefit bank customers and depositors by discouraging executives from prioritizing personal financial gains during troubled periods, though effects on everyday consumers would depend on enforcement.
- On international relations: No direct provisions affect foreign entities or relations.
Main Stakeholders Affected
- Senior executive officers and directors of large banks.
- Large banks and their affiliates (those exceeding $50 billion in assets).
- Federal banking regulatory agencies responsible for supervision and enforcement.
Notable Legal, Constitutional, or Political Implications
- Expands administrative authority over executive compensation without altering core constitutional protections, such as due process in regulatory actions.
- Politically, it targets accountability in the banking sector for institutions of significant size, potentially influencing how stock-based pay is awarded in the future.
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
- Incentivizing Safe and Sound Banking Act — issued 2026-03-09 — PDF (3 pages)