Sponsor
Maxine Waters
Representative · D-CA
Representative · D-CA
The bill strengthens regulators' ability to hold bank executives accountable and protect the Deposit Insurance Fund (benefiting taxpayers and depositors), but it raises legal exposure and compliance costs that could be passed to customers and may deter qualified leaders from banking roles.
Taxpayers and depositors are better protected because the FDIC and other regulators can recoup executive compensation and bar culpable individuals, helping preserve the Deposit Insurance Fund and limit taxpayer losses from bank failures.
Bank executives and boards face stronger deterrents (clawbacks, fines, prohibition notices), which reduces moral hazard and should discourage risky compensation and risk‑taking that can lead to failures.
Clarifying cross‑references and encouraging coordinated rulemaking across regulators improves legal clarity and procedural efficiency for enforcement actions, reducing delays in holding individuals accountable.
Bank customers and taxpayers could face higher costs because increased compliance, enforcement activity, and litigation (and recovery efforts) may raise banks' legal and operational expenses that get passed through as fees or reduced services.
Prospective and current bank executives and directors may be deterred from joining or remaining in the industry because heightened personal liability, daily fines, and broad negligence‑based prohibitions increase career and financial risk.
Ambiguity over negligence standards and broad definitions of 'compensation' could produce legal uncertainty and protracted disputes for former officers and directors, increasing litigation and administrative burden.
Based on analysis of 6 sections of legislative text.
Creates statutory clawback and penalty powers so regulators can recoup pay, fine, and ban executives/directors whose negligence or misconduct caused bank failures.
Creates new tools for federal banking regulators and the FDIC to punish and recover pay from executives and directors of failed banks whose negligence or misconduct caused financial loss. It adds explicit clawback authority for compensation paid in the two years before a conservatorship/receivership (and with no time limit for fraud), authorizes civil monetary penalties for negligent and knowing/reckless conduct, and lets regulators bar responsible individuals from participating in bank affairs. It also urges agencies to finalize robust clawback rules under existing securities law and preserves existing enforcement powers.
Official title: To provide Federal financial regulators with clawback authority over executive compensation and additional industry prohibition and civil money penalty authority with respect to executives whose negligence caused financial loss to the applicable financial institution, and for other purposes.
Introduced March 9, 2026 by Maxine Waters · Last progress March 9, 2026