© Bloomberg. MONTEREY PARK, CALIFORNIA – MARCH 14: President Joe Biden delivers remarks on reducing gun violence at the Boys and Girls Club of West San Gabriel Valley on March 14, 2023 in Monterey Park, California. Monterey Park was the scene of a mass shooting where 11 people celebrating Lunar New Year in a dance studio were killed. Biden made remarks after issuing an executive order aiming to increase background checks for those who purchase guns. Biden also met with families of the shooting victims. (Photo by Mario Tama/Getty Images)
(Bloomberg) — President Joe Biden urged Congress to approve measures enacting tougher punishments on banking executives if mismanagement contributed to their institutions failing, following the recent collapse of three regional banks.
“I’m firmly committed to accountability for those responsible for this mess. No one is above the law – and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement on Friday. “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing.”
The failures of Silvergate Capital (NYSE:) Corp., Silicon Valley Bank and Signature Bank (NASDAQ:) have raised fresh concerns about the US financial system, rattling markets in recent days, along with worries about the health of Credit Suisse Group AG in Europe.
Biden said laws on the books currently limit the administration’s ability to hold executives accountable.
“When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again,” he said.
The Biden administration has moved to shore up confidence in the nation’s banks, with the Federal Reserve offering them a new backstop. Banks have borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week.
The US Treasury and the Federal Deposit Insurance Corp. have also intervened to protect all depositors of both SVB and Signature.
Companies often have their own policies around recovering executives’ pay, and most large public companies have adopted clawback policies which typically cover cases of misconduct or fraud, according to law firm Davis Polk. Still, executive compensation experts have criticized such policies because they…
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