Banking lobbyists, lawmakers gear up for a fight over new exec pay bill spurred by crisis

Failures in the banking sector that nearly tanked the economy earlier this year resulted in a spate of legislative proposals aimed at punishing executives and reining in the banking sector.

They range from a Sen. Bernie Sanders (I-Vt.) plan to prohibit bankers from serving on Federal Reserve boards and acting as their own regulators, to one from Sen. JD Vance (R-Ohio) and other senators diminishing failed bank executives’ enormous levels of pay.

But it is the RECOUP Act, sponsored by Senate Banking Committee chairman Sherrod Brown (D-Ohio), that was marked up in the Senate in June and could be the proposal most likely to make it into law, provided the House is interested in the bill as well.

Shorthand for the “Recovering Executive Compensation Obtained from Unaccountable Practices Act,” it would grant the Federal Deposit Insurance Corporation (FDIC) authority to take back compensation for senior executives at banks with $10 billion or more in assets in the event of a failure.

It would also increase “risk management” standards, “ensuring that management does not deviate from sound governance, internal control, or risk management; and ensuring appropriate long-term risk management tailored to long-term economic conditions,” according to the bill.

According to the Federal Reserve, 132 large commercial banks had assets over the $10 billion threshold as of June 30.

Of those, Bank of America, Citigroup, Morgan Stanley, Discover, TD Bank, Santander and Deutsche Bank — or firms lobbying on their behalf — disclosed work on the RECOUP Act during the second quarter, an analysis of federal lobbying disclosures by The Hill found.

A source within Deutsche Bank was unfamiliar with work on the legislation, and Tiber Creek Group, the lobbying firm that disclosed monitoring the bill on the bank’s behalf, did not return a request for comment from The Hill.

Banking industry stays tight-lipped about what it wants

But most banks, accounting firms and industry groups that disclosed lobbying on the bill have not publicly stated their stance on the legislation, due in part to vagueness in the text about what the updated “risk management” and prudential standards actually mean.

These provisions “could include directing senior officers to implement and oversee reporting and information systems,” attorneys with Mayer Brown wrote in an analysis of the legislation.

The Independent Community Bankers Association (ICBA) spent more than $2.3 million last quarter on federal lobbying efforts that include carving out exemptions for smaller banks in the RECOUP Act.

“ICBA has worked with the congressional offices to include in the bill an exemption for community banks under $10 billion in assets,” the group wrote ahead of the Senate Banking Committee vote.

“ICBA continues working to increase the exemption threshold because, arguing the bill should address large banks with outlier business models, such as the failed Silicon Valley Bank and Signature Bank of New York.”

The ICBA declined to comment to The Hill further for this story. Morgan Stanley also declined to comment, and Bank of America, Citigroup, Discover and TD Bank did not return The Hill’s request for comment.

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