Davis Polk Financial Institutions practice chair Randy Guynn, counsel Ledina Gocaj and associate Andrew Tynes authored “Exec liability bill for failed banks is unnecessary, unwise” in Law360. In the article, they discuss the clawback provision in the proposed RECOUP Act, which would grant the FDIC authority to recoup up to two years of compensation from any senior executive of a failed bank or a parent holding company who was responsible for the bank’s failed condition.

The authors explain that the proposed new power to recoup compensation from senior bank executives is unnecessary. The FDIC already has the authority to recoup compensation from senior bank executives for damages caused by their gross negligence. A strict liability standard of care is inconsistent with the historical standard of care for bank executives in the United States, which has been a negligence or gross negligence standard.

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