Senate bill on bank exec pay clawbacks faces first test

• Dubbed "Recovering Executive Compensation Obtained from Unaccountable Practices Act of 2023," or the RECOUP act, the bill is likely to pass out of committee and move to a full Senate vote.

Zoom in: The proposal comes out of a deal between the chair of the Senate Banking Committee, Sherrod Brown (D-Ohio); and the top Republican on the panel, Tim Scott (S.C.).

• It's a more watered-down version of a piece of legislation introduced by Sen. Elizabeth Warren (D-Mass.), also with bipartisan backing, in the wake of SVB's collapse in March.

Details: The RECOUP bill would give the FDIC the power to claw back certain kinds of compensation — bonuses and equity-based pay, but not salary — that very senior executives received in the 24 months before a bank failure.

• Eligible execs include a bank's CEO and key members of the C-suite, as well as its board chair and inside directors.

• It also increases financial penalties owed by senior executives who "recklessly" violate the law, and requires banks to adopt "governance and accountability standards" around risk management — that includes responding to regulators on a "timely basis."
• Small banks with assets under $10 billion are exempt; as are any executives that came to the bank after it was in crisis, a so-called white knight provision.

What's next: If it passes the Senate, the bill's fate in the House is murky — but its Senate backers are optimistic.

Go deeper: Why clawbacks are tough to pull off