Biden calls for tougher penalties for executives of failed banks

US President Joe Biden on Friday asked the Congress to make stricter provisions in law so that regulators could impose tougher penalties on the executives of failed banks, including taking back compensation and making it easier to bar them from working in the industry.

Biden said he wanted the Federal Deposit Insurance Corporation, which rescued the collapsed Silicon Valley Bank, to be able to force executives to return the compensation paid to them in more banks in case they failed, and to lower the threshold for the regulator to impose fines and bar executives from working at another bank.

Biden's sharp demand comes in the wake of the failures of Silicon Valley Bank and Signature Bank which sent shockwaves through the global banking industry and stock exchanges.

“Strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement. “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing.”

Currently, the FDIC can only take back the compensation of executives at the largest banks in the nation, and other penalties on executives require “recklessness” or acting with “willful or continuing disregard” for their bank’s health. Biden wants Congress to allow the regulator to impose penalties for “negligent” executives — a lower legal threshold.

This comes as the White House noted that Silicon Valley Bank CEO Gregory Becker sold $3 million worth of shares in the bank days before its collapse. Biden wants the FDIC to have the authority to go after that compensation.

The shuttering of Silicon Valley Bank last Friday and of New York’s Signature Bank two days later has revived bad memories of the financial crisis that plunged the United States into the Great Recession about 15 years ago.

Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks’ deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.

 SVB news: Deposits, assets transferred to FDIC-operated ‘bridge bank’