Policy Update: Taking Back Bankers’ Compensation

For several years, leaders at Silicon Valley Bank made a series of bets that contributed, along with poor risk management, to the ultimate failure of that institution. Subsequently, almost up to the very hour federal regulators took over the failing bank, its top leaders were receiving significant bonuses. If bank executives are found to be responsible for the failure of their institution, should those executives be able to keep the profits they earned while leading the bank into ruin? As part of its efforts to prevent future bank failures, Congress has been examining the authorities granted to regulators to discourage bank leaders from taking excessive risks and profiting from bank mismanagement. Leaders within the Senate have arrived at a bipartisan proposal, known as the Recovering Executive Compensation Obtained from Unaccountable Practices (RECOUP) Act, that attempts to address these concerns.