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Senators who oversee the banking industry are taking the first step to punish executives responsible for failures like the Silicon Valley bank collapse in March.
Sens. Sherrod Brown (D-Ohio) and Tim Scott (RS.C.), chairs of the Senate Banking Committee, introduced legislation Thursday that would authorize regulators to adjust bank executives’ compensation for the 24 months before a bankruptcy pawn. In addition to their salaries, executives could be forced to forfeit bonuses and gains from the sale of bank stocks.
The bill also triples to $3 million the civil penalty that regulators could impose on an executive who “recklessly” violates the law or engages in “unsafe and unreliable practices.”
“Americans have too often watched executives take their money, bankrupt banks and get away with it,” Brown said in a statement. “It is time that CEOs, like everyone else, have to face the consequences of their actions.”
Financial regulators continue to investigate the collapse of Silicon Valley Bank, the failure of which rocked the sector and prompted federal intervention. Brown and Scott’s introduction of the bill came on the same day as a Wall Street Journal report saying the Federal Reserve and Securities and Exchange Commission are investigating the role of Goldman Sachs, which bought SVB’s securities portfolio and at the same time the troubled bank advises raising capital before it failed.
Goldman Sachs admitted in a May filing that it was “working with various government agencies and providing them with information related to their investigations and investigations into the collapse of the Silicon Valley bank.”
SVB’s collapse came a few years after it had started to grow rapidly. An April 28 Federal Reserve report laid the bulk of the blame for the bank’s crash on lax oversight by regulators and mismanagement by executives. It also slammed the consultants for not having “designed an effective plan to assess SVB issues”.