Ranking Member Maxine Waters Marks Three Years Since Silicon Valley Bank Collapse, Reintroduces Legislation and Urges Action to Strengthen Banking System
On the three-year anniversary of the failure of Silicon Valley Bank (SVB), Congresswoman Maxine Waters (D-CA), the top Democrat of the House Financial Services Committee, today announced the reintroduction of several bills aimed at strengthening accountability for bank executives, closing regulatory loopholes, and improving the safety and soundness of the nation’s banking system.
The legislation builds on Committee Democrats’ broader efforts following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank to strengthen oversight of large financial institutions, improve accountability, and better protect depositors and the broader financial system.
“Three years after the unexpected collapse of Silicon Valley Bank rocked our banking system, leading to three of our largest bank failures ever, many have wondered what has changed since then. As we saw in past crises, bank executives took reckless risks, ran their institutions into the ground, and then walked away wealthy while consumers, workers, and small businesses were left to deal with the damage, including scrambling to protect their deposits. That is wrong, and it has to stop,” said Ranking Member Waters. “That’s why I and other Committee Democrats keep pushing to advance commonsense reforms to modernize our deposit insurance system, close dangerous loopholes, strengthen oversight, and ensure executives who mismanage their banks face real consequences. I am pleased Chairman Hill partnered with me to advance two of our bills through the House, and I urge him to build on that success by advancing Committee Democrats’ other commonsense measures through the House without further delay. We are not doomed to repeat history as long as we work quickly to address the glaring weaknesses exposed by those large bank failures.”
Ranking Member Waters reintroduced the following measures:
H.R. 7886, the “Failed Bank Executives Accountability and Consequences Act.” This bill would expand bank regulatory authority with respect to clawing back compensation, imposing fines, and banning future work in the industry for bank executives that negligently contribute to their bank’s failure. These authorities would help ensure executives of failed banks are held accountable. The bill includes a Sense of Congress that urges regulators and law enforcement to use all available tools to hold culpable executives of recently failed banks accountable for any misdeeds, and it urges regulators to finalize incentive-based compensation requirements pursuant to Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act with strong clawback provisions. The Senate Banking Committee previously passed a similar bill, the RECOUP Act, led by then Chairman Sherrod Brown (D-OH) and Ranking Member Tim Scott (R-SC) last Congress by a vote of 21-2.
H.R. 7887, the “Incentivizing Safe and Sound Banking Act.” This bill would expand bank regulator authority to prohibit stock sales of bank executives, when appropriate, when issuing a cease-and-desist order to a bank for not complying with the law, and automatically restricting such stock sales by senior executives of large banks if it receives poor exam ratings or does not resolve supervisory citations, such as a matter requiring immediate attention, in a timely manner. This would have prevented SVB bank executives from cashing out when they were repeatedly warned by regulators that their bank was not operating in a safe and sound manner.
H.R. 7888, the “Closing the Enhanced Prudential Standards Loophole Act.” This bill will close a loophole that allowed large banks like Signature Bank and First Republic Bank to escape Dodd-Frank’s enhanced prudential standards simply because they did not have a bank holding company. This would ensure large banks of equal size, complexity, and risk compared to large banks with holding companies will be subject to similar enhanced capital, liquidity, stress testing, resolution planning, and other related requirements.
In addition, Ranking Member Waters also highlighted other legislation that she and Committee Democrats have previously introduced to strengthen protections for depositors and enhance the safety, soundness, competitiveness, and accountability of the banking system. Those bills include:
H.R. 4551, the “Employee Paycheck and Small Business Protection Act,” sponsored by Ranking Member Waters. This bill would use a data-driven process to update the deposit insurance framework for business payment accounts to ensure small businesses can bank with community financial institutions and continue to pay their employees, even if their bank or credit union unexpectedly fails. This bill also enhances emergency tools for the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) to use in future crises. After convening a Member roundtable to explore the issue with industry and experts, Ranking Member Waters first introduced this bill in 2024, and reintroduced it last year. The Committee held a hearing on the bill last November, and the Senate Banking Committee held a hearing on the issue as well. This bipartisan reform effort has been supported by Treasury Secretary Bessent, Vice President Vance, and a number of Congressional Republicans.
H.R. 1910, the “Chief Risk Officer Enforcement and Accountability Act,” sponsored by Representative Sean Casten (D-IL). This bill would codify regulatory requirements that large banks have a Chief Risk Officer (CRO). The bill also requires within 24 hours of a large bank’s CRO position being vacant, the bank must notify their federal and, if applicable, state prudential regulator of such vacancy. Within 7 days, they must submit a plan to their regulator on how they would search for and promptly hire a well-qualified CRO when there is a vacancy. After 60 days, if the CRO position remains vacant, the bank must notify the public and be subject to an automatic cap on their asset growth until such vacancy is cured.
H.R. 6705, the “Stopping Bonuses for Unsafe and Unsound Banking Act,” sponsored by Representative Brittany Pettersen (D-CO). This bill would restrict discretionary bonus payments to executives of any large bank does not resolve a Matter Requiring Immediate Attention or a similar supervisory citation from bank supervisors in a timely manner. Specifically, a bonus freeze would kick in if they do not submit an acceptable remediation plan by a submission deadline set by the regulators, and furthermore, a bonus freeze would take effect if they do not implement the remediation plan by the implementation deadline set by the regulators.
H.R. 3992 (118th), the “Effective Bank Regulation Act,” sponsored by Representative Brad Sherman (D-CA). This bill would require the bank regulators to expand their stress testing requirements. Specifically, rather than doing two stress test scenarios, the bill would require five, and ensure that the Federal reserve conducts stress tests for situations when interest rates are rising or falling.
H.R. 4200 (118th), the “Fostering Accountability in Remuneration Fund Act (FAIR Fund Act),” sponsored by Representative Rashida Tlaib (D-MI). This bill would require large financial institutions to have a portion of senior executive compensation placed into a deferred compensation pool that would get paid out between 2 years and 8 years depending on the size of the large financial institution. In the case of a company’s failure and/or executive misconduct, the fund would be used to cover the costs of paying any fines or resolving the firm. This would supplement incentive-based compensation rules required under Section 956 of Dodd-Frank.
H.R. 4204 (118th), the “Shielding Community Banks from Systemic Risk Assessments Act,” sponsored by Representative Al Green (D-TX). This bill would permanently exempt banks with less than $5 billion in total assets from special assessments the FDIC must collect when a systemic risk exception is triggered, as was done to protect depositors of Silicon Valley Bank and Signature Bank. The bill would allow FDIC to set a higher threshold if warranted while requiring a minimal impact on banks with between $5 billion and $50 billion in total assets.
H.R. 4206 (118th), the “Bank Safety Act,” sponsored by Representative Brad Sherman (D-CA). This bill would prevent large banks from opting out of the requirement to recognize Accumulated Other Comprehensive Income (AOCI) in regulatory capital, which primarily reflects the kind of unrealized losses Silicon Valley Bank had with its securities portfolio. This would address a problem with SVB’s common equity Tier 1 capital ratio artificially appearing 2% better capitalized than it ended up being. The Committee passed the bill by voice vote in November 2024.
Furthermore, the two bills introduced by Committee Democrats in response to the 2023 banking failures that were recently passed by the House as part of H.R. 6644, the Housing for the 21st Century Act are:
H.R. 3716, the “Systemic Risk Authority Transparency Act,” introduced by Representative Al Green (D-TX). This was included as Section 606 of H.R. 6644. The bill would require Government Accountability Office and bank regulators to issue reports if regulators invoke the systemic risk exception, as they did to manage the failures of Silicon Valley Bank and Signature Bank. These reports would provide Congress and the public an analysis to identify the causes of the bank failures, including any management, supervisory, or regulatory shortcomings.
H.R. 6556, the “Failing Bank Acquisition Fairness Act,” introduced by Representative Stephen Lynch (D-MA). This was included as Section 608 of H.R. 6644. The bill would promote competition in banking by narrowing the exception that allows a megabank with more than 10% of U.S. total deposits or liabilities to bid to acquire a failing bank. Specifically, this bill would prevent such megabanks from bidding for a failed bank if there are other eligible bids from other well-capitalized and well-managed banks that meet FDIC’s typical requirements. Only when there are no such bids would these megabanks be permitted to acquire a failing bank.
