![]() ![]() Senators Warren, Catherine Cortez Masto, Josh Hawley and Mike Braun are co-sponsoring a bipartisan bill that would give bank regulators more power to claw back bank executives’ compensation for the five years preceding an institution’s failure.īank regulators already have some ability to take back compensation from executives of failed banks, thanks to the Dodd-Frank Act, a response to the 2008 financial crisis. ![]() But they work a bit differently than assessments: Instead of funding bailouts, they aim to impose personal costs on executives who lead failed banks. “The effectiveness of deposit insurance depends upon how it is used with other policy tools,” said Gruenberg to the House Financial Services Committee on May 16.Ĭiting the risks caused by large concentrations of uninsured deposits and certain other short-term liabilities, Gruenberg said, “Regulation and supervision play important roles in constraining moral hazard and supporting financial stability.” Lawmakers Urge Clawback Of Reckless Execs’ Pay to Warn OthersĬlawbacks are another tool that authorities can use to make banks pay for failure. This would, in turn, require the DIF to hold an even larger balance. The May 1 failure of First Republic Bank was an additional push on the FDIC board to propose another special assessment on banks with more than $5 billion in uninsured deposits.įDIC Chairman Martin Gruenberg and many lawmakers are also considering raising the $250,000 per-account cap on deposit insurance. With the latest developments, the FDIC is planning to revisit all aspects of the fund. To meet its replenishment deadline of September 2028, the FDIC has been charging special assessments on banks. ![]() As people stayed home, saved more money and deposited their relief checks, cash poured into accounts and stayed there. That ratio has been below its statutory minimum since 2020 partly due to Covid-19. In order to sustain the FDIC’s $250,000 insurance on customers’ bank deposits, Congress requires the DIF to maintain a certain ratio of fund balance to total bank deposits. But the usual arrangements have been strained by the high cost of recent collapses. The DIF is drawn from participating banks’ quarterly deposit insurance premiums, called assessments. Ordinarily, when a bank fails, the losses are paid out from the FDIC’s deposit insurance fund (DIF). So who will? Banks Pay Into FDIC Fund for Failures, But More Is Needed Now Elizabeth Warren to Becker at a mid-May Senate Banking Committee hearing.Īt the hearings, lawmakers, regulators and the bank executives clashed over who should pay for these enormous failures. This is “money that someone is going to have to make up-big banks, community banks, depositors, consumers, somebody,” said Sen. Months later, the men in charge have faced no financial consequences for what happened on their watch. Sorting out the bank failures cost the deposit insurance fund managed by the Federal Deposit Insurance Corp. The chief executives of Signature Bank and Silicon Valley Bank took home tens of millions of dollars in compensation in the years leading up to the collapse of their institutions.įormer Silicon Valley Bank CEO Greg Becker and former Signature Bank chairman/co-founder Scott Shay earned, between them, a total of $60 million in the four years before their banks imploded. ![]()
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