President Joe Biden on Friday called on the US Congress to approve laws that would impose stronger penalties on executives of failed banks, following the collapse of two regional banks.
He urged politicians to grant the Federal Deposit Insurance Corporation greater authority to go after those executives after the failures of Silicon Valley Bank and Signature roiled global markets.
The FDIC is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system.
“Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing,” Mr Biden said.
Keen to avoid a contagion that could result in a run of deposits on other banks, federal regulators swooped in at the weekend to protect uninsured depositors at SVB and Signature, including those who have sums that exceed the Federal Deposit Insurance Corporation's $250,000 limit.
Mr Biden wants the FDIC to be given the power to reclaim money paid out as compensation from executives at banks that fail. He also wants to strengthen the regulator's authority to levy fines against those executives.
“I'm firmly committed to accountability for those responsible for this mess. No one is above the law — and strengthening accountability is an important deterrent to prevent mismanagement in the future,” the President said.
The FDIC can so far only seek to impose penalties on bank executives who “recklessly” participate in “unsafe or unsound” practices. Mr Biden wants that authority to be expanded to seek fines from “negligent executives” of failed banks as well.
Mr Biden previously said that investors in the banks would not be protected by federal regulators' actions this past weekend.
The White House also pointed to a Wall Street Journal report in which the chief executive of SVB allegedly sold more than $3 million worth in shares days before the FDIC seized control of the bank. Mr Biden called on Congress to grant the FDIC authority to reverse that transaction.
The US Justice Department and Securities and Exchanges Commission have both launched investigations into SVB and Signature's collapse.
Mr Biden is also seeking to ban executives from the banking industry if their banks go into receiverships.
The failures of Silicon Valley Bank and Signature set off fears in the US and Europe over a potential banking crisis.
Shares of other midsized lenders in the US have plummeted since last week, with First Republic Bank experiencing particular volatility in the market. After a group of banks gave the institution a $30-billion rescue package, its shares continued to tumble on Friday.
Also coming under pressure in the European market was Credit Suisse, whose shares closed 8 per cent down a day after the Swiss central bank gave it a $54 billion lifeline.
The KBW bank index, which tracks banks that are publicly traded in the US, fell 11 per cent in the last week.
