Bank Failure Accountability Act
- Bill Number
- H.R. 9490
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Status
- Introduced
- Latest Action
- 2026-06-25: Referred to the House Committee on Financial Services.
- Last Updated
- 2026-07-06T13:38:29Z
AI-Generated Summary
Bank Failure Accountability Act (H.R. 9490)
Purpose
This legislation creates a system to defer a portion of senior employee compensation at large financial institutions. The deferred amounts are held in a special fund that must first cover any civil or criminal fines against the institution and, in cases of bank or credit union failure, protect depositors before government insurance funds are used. The goal is to align incentives by making senior employees bear financial consequences for misconduct or excessive risk-taking.
Key Provisions
- Deferment Fund Requirement: Covered institutions and their subsidiaries must create a dedicated fund containing only deferred compensation, which can only be used as specified in the bill.
- Compensation Deferral Formula: Each year, institutions must defer at least 50% of any senior employee's compensation that exceeds seven times the median employee pay at the consolidated institution. This deferred pay goes into the fund.
- Payment Timeline: After a defined deferment period (ranging from 2 to 8 years based on institution size), remaining funds are paid to the employee if not used for other purposes.
- Priority Use of Funds:
- Fines must be paid from the deferment fund first.
- In depository institution or credit union failures, the fund must cover depositor losses before the Deposit Insurance Fund or National Credit Union Share Insurance Fund is accessed.
- Cancellation Policy: Any deferred compensation that cannot be paid due to insufficient fund balances is canceled.
- Ex-Employee Protections: Deferred pay for former employees is segregated and protected from use for fines related to misconduct occurring after their departure.
- Rulemaking Authority: The Federal Reserve, Office of the Comptroller of the Currency, FDIC, Federal Housing Finance Agency, National Credit Union Administration, and SEC may issue implementing rules.
- Definitions: The bill defines key terms such as "covered financial institution" (those with over $1 billion in assets), "senior employee" (based on role, pay level, or authority thresholds), and varying deferment periods by asset size.
Significant Changes to Existing Law
The bill introduces a mandatory deferral and clawback-like mechanism for senior compensation that does not currently exist in federal law. It shifts the financial burden of fines and depositor protection from shareholders, insurance funds, or taxpayers to deferred senior employee pay. This represents a new regulatory overlay on compensation practices at institutions previously subject only to general banking and securities rules.
Potential Impacts
- Government Agencies: Regulators gain new oversight and rulemaking duties, potentially increasing administrative workload while reducing calls on deposit insurance resources during failures.
- Citizens and Depositors: Depositors at covered institutions receive enhanced protection, as deferred funds must be exhausted first in failures.
- Financial Sector: Institutions face compliance costs and altered compensation structures; senior employees experience delayed and conditionally payable pay.
- International Relations: No direct effects are specified, though the policy could influence global discussions on financial executive accountability.
Main Stakeholders Affected
- Large financial institutions (banks, broker-dealers, credit unions, investment advisers, Fannie Mae, and Freddie Mac) with over $1 billion in assets and their subsidiaries.
- Senior employees, including executives and highly compensated individuals.
- Depositors at covered depository institutions and credit unions.
- Federal financial regulators responsible for supervision and rulemaking.
- The broader public, through potential effects on financial stability and insurance fund usage.
Notable Legal, Constitutional, or Political Implications
The bill creates a new federal framework for compensation deferral and fund prioritization that could intersect with existing employment contracts and securities laws. It emphasizes accountability for past financial crises and recent bank failures without altering constitutional structures of regulation. Implementation depends on agency rules, and the policy applies only to institutions above specified asset thresholds.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (3)
Rep. Lynch, Stephen F. [D-MA-8], Rep. Lee, Summer L. [D-PA-12], Rep. Green, Al [D-TX-9]
Recent Actions
- 2026-06-25: Referred to the House Committee on Financial Services.
- 2026-06-25: Introduced in House
- 2026-06-25: Sponsor introductory remarks on measure. (CR H4251)
- 2026-06-25: Introduced in House
Bill Versions
- Bank Failure Accountability Act — issued 2026-06-25 — PDF (10 pages)