1. Short title
This Act may be cited as the “Wall Street Banker Accountability for Misconduct Act of 2019”.
Wall Street Banker Accountability for Misconduct Act of 2019
A BILL
To amend the Bank Holding Company Act of 1956 to defer part of the compensation of senior employees of large bank holding companies (and their subsidiaries) for 10 years, to use such deferred amounts to pay any civil or criminal fines that may be levied on the bank holding company (or subsidiary), and for other purposes.
2. Findings
The Congress finds the following:
Senior employees of major bank holding companies receive extraordinary pay packages, even when they oversee massive frauds and financial misconduct.
Widespread financial misconduct by individual Wall Street bankers led to the 2008 financial crisis, which caused the Great Recession. The Department of Justice brought litigation against every major bank, resulting in more than $163,000,000,000 in fines.
This misconduct resulted from the actions of individuals and was a direct result of a banking culture that rewards bad behavior.
Despite the actions of individuals, Wall Street banks paid billions of dollars in fines out of monies that otherwise were owned and could be paid in dividends to shareholders. While culpable bankers continued to receive extraordinary pay, innocent shareholders paid the price for banker misconduct.
In the aftermath of the Great Recession, and after further misconduct in the financial services industry, the Federal Reserve Bank of New York has urged financial firms to reevaluate and reform their compensation incentive structures to align with shareholders and customers interests.
Misaligned incentives within the banking industry continue to fail to hold Wall Street executives and their senior employees accountable for their actions.
3. Deferment of senior employee compensation
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by inserting after section 5 the following:
“6. Deferment of senior employee compensation
“(a) Deferment fund—Each covered bank holding company and each subsidiary of a covered bank holding company shall establish a deferment fund, which shall—
“(1) only contain compensation deferred under subsection (b); and
“(2) only be used as permitted by this section.
“(b) Deferment of compensation—Each covered bank holding company and each subsidiary of a covered bank holding company shall—
“(1) each year, defer the compensation of each senior employee of the bank holding company or subsidiary in an amount equal to at least 50 percent of the amount that the employee’s total compensation for the year exceeds 10 times the compensation of the median paid employee of the consolidated bank holding company for the year;
“(2) place all compensation deferred under paragraph (1) into the deferment fund of the bank holding company or subsidiary; and
“(3) after the end of the 10-year period beginning on the date the compensation was deferred, if sufficient funds remain in the deferment fund, pay the senior employee the amount of compensation deferred at the beginning of the 10-year period.
“(c) Use of deferment fund To pay fines—If a covered bank holding company or subsidiary of a covered bank holding company is subject to a civil or criminal fine, the bank holding company or subsidiary shall first pay such fine out of amounts contained in the deferment fund of the bank holding company or subsidiary.
“(d) Cancellation of compensation that cannot be paid from deferment fund—Each covered bank holding company and each subsidiary of a covered bank holding company shall have in place a policy that cancels any compensation deferred under subsection (b) that cannot be repaid as described under subsection (b)(3), due to the deferment fund lacking sufficient funds.
“(e) Treatment of deferred compensation of ex-Employees—With respect to an individual that has compensation deferred pursuant to subsection (b), but is no longer employed by the applicable bank holding company or subsidiary, if the bank holding company or subsidiary is required to pay a fine from its deferment fund for misconduct that occurred after the individual was no longer employed by the bank holding company or subsidiary, the bank holding company or subsidiary shall segregate the individual’s deferred compensation from other amounts in the deferment fund and shall not use such segregated amounts for any purpose other than repaying the individual pursuant to subsection (b)(3) or for the payment of another fine for misconduct that occurred while the individual was still employed by the bank holding company or subsidiary.
“(f) Rulemaking—The Board may issue such rules as the Board determines necessary to carry out this section.
“(g) Definitions—In this section:
“(1) Compensation—With respect to an employee, the term “compensation” means any financial remuneration, including salary, bonuses, incentives, benefits, severance, deferred compensation, or golden parachute benefits, and any profits that would be realized from the sale of the securities of the company employing the employee.
“(2) Consolidated bank holding company—With respect to a bank holding company, the term “consolidated bank holding company” means the bank holding company and all subsidiaries of the bank holding company.
“(3) Covered bank holding company—The term “covered bank holding company” means a consolidated bank holding company with more than $250,000,000,000 in consolidated assets.
“(4) Senior employee—The term “senior employee” means an employee of a covered bank holding company or a subsidiary of the covered bank holding company who—
“(A) has total compensation of more than $1,000,000;
“(B) is identified by the bank holding company as one of the 100 most senior officers of the consolidated bank holding company;
“(C) receives one of the 100 largest compensation packages of the consolidated bank holding company;
“(D) receives compensation that is more than 10 times the compensation of the median paid employee of the consolidated bank holding company; or
“(E) has the authority to commit or expose 0.5 percent or more of the capital of the consolidated bank holding company.”