CFPB Director Rohit Chopra said today that existing law allows regulators “to really kick the tires” on executive compensation at failed banks like Silicon Valley Bank. In an interview with the Washington Post on the recent bank closures, Chopra didn’t provide any examples of regulatory actions his agency or others would take in the case of SVB. However, he said regulators should look at their existing legal authorities to see where there were violations and hold individuals accountable. “It’s sitting there in the law, and the regulators just have to implement it,” he said.
“We can’t have a system where executives take huge risks that blow up years down the road but can pocket big sums of money and stock options, and they can fly the coop before the damage wrecks the bank,” Chopra said. “There’s lots of ways to do this. There can be restrictions on the forms of executive compensation, such as stock options. There can be more requirements on deferring some of that compensation. …We’ve got to really see how we make sure we align the incentives of those executives, and it’s going to be really important to implement those provisions in law.”
Chopra—who is also a member of the FDIC board—also floated the idea of a deposit insurance system where banks can choose to pay higher rates if they wanted to insure business accounts above current deposit insurance limits. “I personally think that there may be a place where we can give higher limits that banks would pay for in insurance premiums for these types of payroll accounts, so that small businesses (and) other businesses can keep their money safely,” he said. “It maybe should be tailored to non-interest bearing accounts that are really for these payroll accounts.” However, he stressed that the decision would be up to Congress.